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Posts tagged with risk

Things I Failed

I’m bored of #ff meaning follow Fridays. Let’s do Failure Friday instead and talk about things we’e failed at.

  • I failed an arithmetic test.
  • I failed judo class.
  • I failed to attract interest with my CV.
  • I failed to be married or have a stable job by my 30th birthday.
  • I failed an entrance exam.
  • I failed most of my writing assignments.
  • I lost an important contest.
  • I lost a race. Badly.
  • I lost a client I thought I had secured.
  • I failed a client I thought I could help.
  • I failed to get paid what I thought I was worth.
  • I failed to be honest in a romantic relationship.
  • I failed to do anything cool for a few years.
  • I couldn’t walk on a mountain because I was so out of shape.
  • I failed to wear sunscreen.
  • I failed to read the prospectus.
  • I failed to get into my preferred university.
  • I failed to get someone to fall for me.
  • I didn’t know what I wanted or how to get it.
  • I failed to keep in touch with old friends.
  • I failed to impress people.
  • I failed to advocate for myself.
  • I failed to do things on time.
  • I lost Other People’s Money.
  • I failed to come up with good ideas.
  • I failed to give it my all.
  • I failed to lose weight.
  • I failed to meet expectations.
  • I failed to look “put together”.
  • I failed to stay organised.
  • I failed to Get Things Done.
  • I failed to cook a good dinner.
  • I failed to recognise the obvious signs.
  • I failed to learn what I was trying to learn.
  • Things did not go according to plan.

NB: I don’t intend Failure Friday as a pity party. It just bugs me when people try to act flawless and successful. Infinitely wise with inerrant self-command. Even apparent failures are successes in disguise. Sorry stories modulate into major key as the lessons learned were invaluable rungs on the ladder of upward progress so in the end it all worked out for the best.

What is that? You’ll probably just make people who are already down feel worse by doing that. And not make anyone feel better.




Since the onset of the Great Recession, 24 bonds that were rated, intended to finance essential services, and backed by tax revenues, have defaulted.


Among Moody’s rated municipal bonds, there have been only 3 school district defaults and two utility defaults since 1971.


Bond insurance was present in at least 5 of the 8 most significant defaults since 2009.

Breckinridge Capital Advisors, quoting Municipal Market Advisors, Default Trends, 5 June 2012.

A while ago I was naïvely wondering how you would compare financial risks in investing in sovereign bonds, municipal bonds, corporate bonds, versus equity risk in public stock markets.

Spurred by wondering why anyone would lend to the United States Treasury when the rates are so, so low. (That question came from reading op-eds about austerity, fiscal cliffs, and so on—where someone inevitably brings up that the US can borrow for free so it shouldn’t worry about its short-term deficit. Keyword “bond market vigilantes”) I mean, couldn’t you get much more money lending to pretty much anywhere else? Answer, found.

(although probably part of the answer is that US TSY, Bunds, and Gilts can soak up huge huge quantities, and there’s no “bank” where you can put a few hundred billion dollars.)

(Source: breckinridge.com)




Linear extrapolations are preferred to discontinuous ones, except when the discontinuous extrapolation is correct. picture via David A Edwards

hi-res




Building a railway through “the roof of the world” (Tibet).

  • A clever low-low-tech solution to the problem of ground’s freezing & thawing messing up your hard structure. (Also a clever low-tech, but not low-low-tech solution.)
  • Specific numbers that matter a lot: how many days do you need to stop at what altitudes on your way up to work at 5000 metres (15,000 feet) above sea level?

National Geographic:-Megastructures-Extreme Railway (por Simon Peter)




I find pro-environmental chatter so much more credible coming from an old Texan engineer with a heavy drawl from the industry, than my normal stereotype of an anti-fracking activist.

Dale Henry, Petroleum Engineer (por CitizensShale)




deepwater horizon oil spill, day 100 via the jerry curl

hi-res




The original paper defining Conditional Value at Risk = CVaR = Expected Tail Loss.

Pessimism & Probability Distributions

What’s “the best” statistic? If you couldn’t see an entire probability distribution, but you could ask one question of it and get one number out, what question would you ask?

In an interview given to EDGE magazine, Bart Kosko explains how great the median is. He used to think the mean was the statistic to look at (cf., Francis Galton’s story of the crowd average guessing correctly the weight of the prize hog to a tenth of a unit) but the median is more robust and so on.

My opinion is that the most important statistic for many practical purposes is something like the 25% CVaR or 50% CVaR. I think that’s the essence of “What do you stand to lose?” as people mean it in normal English.

http://www.washingtonpost.com/blogs/ezra-klein/files/2012/07/indexed_stagnation.jpg

In other words, I think the way people think about risk in everyday, non-finance terms, basically boils down to

  • the observed minimum (theoretically possible minimum if you’re a lawyer) and
  • the CVaR (expected loss) for some wide-ish (likely) swath of the bad outcomes.

The reason the CVaR is so intuitive is that it smoothly interweaves both

  • egregiously bad, low probability outcomes (“You could die with a .01% probability!” is actually a good reason to avoid something)
  • and likely bad outcomes (“After you graduate you might not find a job in your field”).

So obviously there isn’t “one best” question to ask. It depends what you want to know—if it’s the value of the gravitational constant, median may be a great statistic. On the other hand, if you’re looking at the salaries that might result from  your law degree or MBA—that is, if you’re looking for a sensible measure of risk and downside—then I’d suggest a CVaR.

(I actually emailed Dr Kosko and got a response—but he linked to a 20-page paper he had written and I never got around to reading it and felt bad responding without reading all of his response.)