In his 2004 book, Fooled by Randomness, (highly recommended), Nassim Nicholas Taleb provided one of the better analogies for market risk that I have encountered. See page 198 and 199 of his book.
Briefly he asks the reader to consider that what matters most is the confidence we have in any forecast. He uses the story of a traveller who has two options for a November trip. (more…)
