Re:The Statistical Crisis in Science
by dschiptsov on Friday January 16, 2015 @01:41PM
(#8900730)
How do you model events such as yesterday's EUR/CHF?
Re:The Statistical Crisis in Science
by hessenwolf on Monday January 19, 2015 @08:49AM
(#8911883)
I think the Swiss Bank intervention is the classic black swan story. The model really only works until somebody puts their foot in it.
Risk management looks at the usual processes via stochastic modelling, but you need to also make scenario analysis, where you just make a deterministic event happen and then measure the effect on the value of your portfolio.
Re:The Statistical Crisis in Science
by mynegation on Friday January 16, 2015 @03:16PM
(#8901394)
Stochastic volatility and jump diffusion models
Now let's say you are bullish on the stock and borrow $400 to buy 5 stocks. In the same model, after gain or loss is realized and $400 is returned to the creditor after one week you are either $50 poorer or $50 richer, your magnitude of risk grew 5-fold by leveraging.