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One of the scapegoats of the financial crisis was value at risk. Still communicating risks effectively to clients is a big challenge and hugely important (also to keep your job as a quant!) In this question I am talking mainly about potential losses and drawdowns of trading strategies and derivatives.

My question
Do you know innovative (or experimental) ways of communicating risk? These can be new ratios or visualizations or animations or .... Also unconventional ideas are welcome! The more intuitive these new ways are the better! If possible please give examples and/or references.

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  • $\begingroup$ could you provide any references as to why var should be the scapegoat of the financial crisis? $\endgroup$
    – vanguard2k
    Apr 29, 2015 at 15:11
  • $\begingroup$ @vanguard2k: It is e.g. in the link I provided under criticism: en.wikipedia.org/wiki/Value_at_risk#Criticism $\endgroup$
    – vonjd
    Apr 29, 2015 at 15:41

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Try to give David Spiegelhalter a read/listen to David Spiegelhalter's work and research. He is a statistician and a Professor of the Public Understanding of Risk at Cambridge England.

Rather than new ways of calculating risk, he looks at ways of communicating risk to a general public that doesn't have any knowledge of stats. I Linked an interesting video-lecture right below.

Professor David Spiegelhalter: Communicating risk and uncertainty

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The work of the NYU V-Lab is interesting to me. They try to measure risk in the system as a whole "systemic risk", rather than risk in a single portfolio.

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communicate risk in terms of loss to a given portfolio in simple terms so that ANY client would understand.

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    $\begingroup$ so which loss would you communicate? the potential losses are from -100% to 0%. $\endgroup$
    – emcor
    Jun 3, 2015 at 21:35
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    $\begingroup$ Yes, but how would you do that? I'm downvoting as technically this is an answer but doesn't help. $\endgroup$
    – Bob Jansen ♦
    Jun 4, 2015 at 6:31
  • $\begingroup$ @BobJansen: I am voting to delete this post, it is not helpful at all! $\endgroup$
    – vonjd
    Jul 22, 2015 at 10:16

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