### How to manipulate risk forecasts and not get caught

##### November 19, 2022

###### It is easy to manipulate risk forecasts. If your regulator or compliance officer sets a risk target you don't like, just tell them what they want to hear while continuing doing what you want.

The following anecdote comes from The Illusion of Control. Suppose my job is to forecast the risk of some portfolio, measured by VaR. One day my boss calls me into her office:

It's not difficult to do this, and when I lecture on risk forecasting, I show my students exactly how to do this.

The easiest way to manipulate the risk measurements is to pick a riskometer that delivers a lower number. On my website, extremerisk.org, I forecast risk daily using the most commonly used techniques.