JPMorgan Chase CEO Jamie Dimon said the firm suffered a $2 billion trading loss blaming an “egregious” failure in the firm’s risk management. JP Morgan’s $2 billion dollar blunder has its roots in something called Value at Risk (VAR) which is a measure of how much a company estimates it could lose on a portfolio of securities on 95 percent of days. It’s a model that supposedly measures the boundaries of risk in a bank, a portfolio, or a hedge fund under “normal” market conditions. Its main selling point is that it can simply express risk as a single number or dollar figure and ignore the greater complexities of financial markets. Continue reading →