This morning we were struck by the following paragraph in a New York Times article:
While others are shying away from risks, Goldman is courting them. A common measure of risk-taking at Goldman and other banks is known as value at risk, which estimates how much money a firm might lose on a single day. At Goldman, that figure rose by more than 20 percent in the first quarter. Analysts predict Goldman’s V.A.R. ran high in the second quarter as well.
And now we have the actual VaR performance (95 per cent) for the second quarter:
Roughly speaking, that means there’s a 5 per cent probability that Goldman’s portfolio will fall in value by more than $245m in a one day period.
That’s about a third more than the amount at risk in the last nearest comparable (Q2 2008).
Related links:
On Goldman’s fat tail risk – FT Alphaville
VaRy complex — FT Alphaville