On Banks Ignoring Risk Warnings From the Troops

"I'm a bit perplexed at a Gillian Tett piece in the Financial Times in which she is shocked, shocked that managers didn't heed warnings from subordinates that risk models weren't all that they were cracked up to be. Her article wouldn't seem odd, except it focuses on a really basic shortcoming, namely that many models (Black Scholes, Value at Risk being some of the best known) assume a normal distribution of risk (also known as Gaussian or a bell curve). Anyone who knows the basics is aware that markets deviate from a normal distribution: they exhibit skewness (results are not symmetrically distributed around the mean) and "fat tails" or kurtosis risk (extreme events are far more probable than in a normal distribution)"