Risk adjusted returns

I´m probably the prototype of a risk-averse investor. It usually takes sometime until I make my investment decisions but once in - after due dilligence - I hold on. Admitedly sometimes to long and an earlier exit would have been sometimes beneficial. However my investments are usually long shots and are not exactly providing daily liquidity.

Throughout my career Risk Management has been the center of my daily activities. I started as Risk Manager in an Insurance Company and worked for a Logistic Group as Risk Manager. I developed Risk Management Software for Insurance Companies around VaR in the early `90 and sold this company to an international Finance Group.

So, one could say I´m natuarlly risk averse. Let`s say I`m risk sensitive and all I`m doing currently is trying to find a Formula representing my very specific and individual risk appetite, helping me to benchmark and backtest some investment ideas.

I was once convinced that you can use VaR and CVaR but lost some faith in the aftermath of the New Economy Bubble and retired it enitrely after reading some books by Nassim Taleb. I became less enthusiastic about those Formulas and getting now increasingly concerned with the dangerous comfort they are providing.

What are you doing with the information that there are tail events however most unlikely to occur but if they occur you are out of business.


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