The only "tail" they get and they can't even get it right
Here: http://falkenblog.blogspot.com/2009/03/review-of-talebs-black-swan.html
He doesnt have quite as good a grasp of Taleb though, although for sure Taleb’s abrasive style does not make it easy for any serious reader to accept. But here is Falkenblog on VAR:
VaR is not useful for allocating capital, or estimating the cost of equity, but it is useful in keeping your traders honest. It allows one to measure risk given various assumptions, and like any model it is garbage in-garbage out. The recent financial crisis has often been blamed on VaR. To the extent certain banks applied VAR to mortgages, using, say, a 10-day VAR based on data from the benign 1990s, was an error. Yet, the ubiquity of this error suggests it was not a mathematical mistake (math errors are random and go in both directions), rather a flawed assumption that implied benign VAR exercises: the fact that housing prices do not decline. One can say with hindsight, this was incredibly stupid, yet no one was arguing for financial institutions must be robust to this scenario prior to 2007, and the government regulators were actively encouraging no downpayment, no documentation loans as part of a multipronged effort to increase home ownership. That is, the mistaken assumption was part of a broader mistake, comprehensible to all, not some technical error by risk managers, because that assumption was not theirs to make; it was part of a zeitgeist that people seem to forget like all those who forgot voting for Nixon after he resigned. Most importantly, VAR is not perfect, nor a panacea, but the onus is on critics to describe a better alternative. Using ‘judgment’ or ‘all one’s information’ seems better with hindsight, yet as foresight this is so undefinable it would be a signficant step backward.
And I have 3 new additions to my Books To Read:
http://www.amazon.com/Chaos-Making-Science-James-Gleick/dp/0140092501
http://www.amazon.com/Mis-behavior-Markets-Benoit-Mandelbrot/dp/0465043550/ref=cm_cr_pr_product_top
