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Still, extreme outcomes remain unlikely.
You just hold some portion adequate for providing diversification and a hedge against extreme outcomes".
What is scarier still is the uncertainty about the truly extreme outcomes.
They are plagued by fat tails or extreme outcomes; failing to allow for these outcomes contributed to the recent crisis.
Consequently, risk-management strategies that relied on the fancy new time-series techniques made the same error that the less sophisticated techniques did: they greatly underestimated the possibility of extreme outcomes.
Accordingly, we tend not to paint a nuanced picture of a complex reality, but to stick to the version constituting extreme outcomes.
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Kirkuk remains dangerously stalled, while facts that could force the most extreme outcome steadily accumulate on the ground.
One extreme outcome that investors feared until recently was a bout of inflation.
The most extreme outcome, therefore, would be a separate monetary policy committee that strictly targets consumer prices.
Nobody knows, but an extreme outcome, in either direction, would obviously make a big difference to the bank's capital position.
Asked what kind of "extreme" outcome he would like to see, Ricotta said: "1933", the year Adolf Hitler became chancellor of Germany.
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