The model was fit on a calm market. Then the market stopped being calm.
You are not paid to forecast the mean. You are paid to survive the tail.
A $100M book across equities, high-yield credit and exotics. The risk model was fit on a calm sample. In a moment it will stop describing the world.
VaRthe threshold
EXPECTED SHORTFALLthe loss beyond it
CORRELATIONgoes to 1 when it matters
FAT TAILSnormal is optimistic
Interview lens: “what is wrong with VaR?” is asked in every risk interview. The answer is not that it is inaccurate - it is that it is silent past its own threshold.