Michael: > Risk is when you can assign the probability, but most of the time you > cannot. How often do 100 year floods occur?
Now, we are talking about tail risk, that is, about the probability with which extreme events may occur. Can we always assign a probability to such events, I don't know. Yet, in the financial markets extreme events such as 100 year floods occur every few years and I am saying this from my personal experience. I got into this finance business in 1994 and that year the global debt market collapsed: about 10 trillion dollars evaporated in 1994 in the global debt market as I was watching. Can we assign a probability to such events, I don't know. When we cannot, they call it uncertainty in the current economics parlance, although I am not sure if it is the right word. Maybe "unkown unknowns" is(are) the right word(s)? However, Michael, were you not one of those who claimed depression way before it started? So, maybe, "unkowns" are not so "unknowns" after all, who knows? Best, Sabri _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
