I think they can only mean either “variance” or “badness of worst case”
In the context of financial markets, risk = variance from the mean (often measured using the standard deviation). My finance professor emphasized that although in everyday speech “risk” refers only to bad things, in finance we talk of both downside and upside risk.
So “risk” really does mean surprise to them. Do you think this impairs their ability to reason about risk? E.g., would they try to minimize their risk because that’s a good thing, for the ordinary definition of risk, but then actually minimize their variance? Do they talk to clients using the word “risk”, and being aware on one level that they mean something different, yet not explain the difference?
In the context of financial markets, risk = variance from the mean
That it not true, or, rather, not entirely true. VAR is very widely used in the real world and it’s not variance. I also think Taleb would facepalm at this definition X-)
I think they can only mean either “variance” or “badness of worst case”
In the context of financial markets, risk = variance from the mean (often measured using the standard deviation). My finance professor emphasized that although in everyday speech “risk” refers only to bad things, in finance we talk of both downside and upside risk.
So “risk” really does mean surprise to them. Do you think this impairs their ability to reason about risk? E.g., would they try to minimize their risk because that’s a good thing, for the ordinary definition of risk, but then actually minimize their variance? Do they talk to clients using the word “risk”, and being aware on one level that they mean something different, yet not explain the difference?
That it not true, or, rather, not entirely true. VAR is very widely used in the real world and it’s not variance. I also think Taleb would facepalm at this definition X-)