Understanding the Fat-tails of a risk driver. The global financial crisis that began in the fall 2007 is a profound reminder that black swans - those rare events which, until they occur, may have been thought impossible – do exist. Furthermore, history shows that these extreme events, fat tails, are not a once in a thousand year occurrence as modern portfolio theory leads us to believe. These events occur with regular frequency. Yet, time and time again, market participants are seemingly stunned by each event. The severity of the current crisis should result in...

How can Risk Management become a profit center and source of competitive advantage? It’s hard to know who to listen to these days. It seems that everyone has ideas about what has caused the current market crisis, but few seem to offer credible ideas about how to address the underlying problems going forward. 2 Some things seem irrefutable...

How can FinAnalytica help Hedge Fund investors in the current market crisis? We have just seen a financial Black Swan. Most people don’t talk much about these types of events because by their very nature they are extremely rare, but as the world now knows, they can have a profound impact on our lives. Because of their rarity and resulting lack of data, most risk management practitioners ignore such “tail risk” and focus instead on the comfortable complacency of “normal market conditions” where there is plenty of data and things usually meander along pretty much as we expect them to… except when they don’t, and then crisis sets in. The problem is that...