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JOURNAL OF APPLIED BUSINESS AND ECONOMICS
The Problems in Quantifying Risk
Author(s): Jeffry Haber
Citation: Jeffry Haber, (2011) "The Problems in Quantifying Risk," Journal of Applied Business and Economics, Vol. 12, Iss. 2, pp. 61 - 63
Article Type: Research paper
Publisher: North American Business Press
Abstract:
The sixteen month duration of the financial crisis was a terrible time for investment professionals. From
fund managers to consultants to investors, no one was spared market losses and anxiety over where the
financial industry was headed and when the bleeding would end. Right before the financial crisis began
risk quantification models were rampant, from value-at-risk (VaR) to Sharpe ratios to stress testing
portfolios. In the end it did not matter – all models failed horribly. How could so many educated,
experienced, intelligent, well-meaning professionals fail so badly? It all has to do with the basic concept
of risk. Ask anyone who talks about risk to define the word, and you most likely will be met with a blank
stare. Risk is a word we all talk about but do not define what we mean. This paper presents the issues in
quantifying and discussing risk.
