Market Moves That Are Supposed to Happen Every Half-Decade Keep Happening
Investors have been selling government bonds, causing yields to jump sharply.
Source: Bloomberg terminalPeer under the proverbial hood of a big bank or investment company's risk management chassis and one might see a mathematical model that looks something like this.
"Value at Risk," or VaR, models use statistical analysis and historical data to attempt to quantify how much an investor might expect to lose from trading within a certain time frame and within a certain probability. While such VaR models were criticized in the aftermath of the financial crisis for failing to predict heavy losses incurred on subprime mortgage securities and associated assets, they still form the backbone of Wall Street's risk management systems. Traders operate within their limits; woe betide the junior trader who exceeds their VaR.