Such events have a probability of around 10-50 of happening
No, you cannot infer a probability just from a SD. You also need to know what type of distribution it is. You’re implicitly assuming a normal distribution, but everyone knows asset price returns have negative skew and excess kurtosis.
You could easily correct this by adding “If you use a normal distribution...”.
Up to this point in the post you haven’t mentioned any models. If you give a probability without first mentioning a model for it to be relative to, the implication is that you are endorsing the implicit model. But this is just nit-picking.
More importantly, there are many models used by people in the market. Plenty of people use far more sophisticated models. You can’t just say “the market models” without qualification or citation.
No, you cannot infer a probability just from a SD. You also need to know what type of distribution it is. You’re implicitly assuming a normal distribution, but everyone knows asset price returns have negative skew and excess kurtosis.
You could easily correct this by adding “If you use a normal distribution...”.
I’m not implicitly assuming it—the market models were the ones explicitly assuming it.
Up to this point in the post you haven’t mentioned any models. If you give a probability without first mentioning a model for it to be relative to, the implication is that you are endorsing the implicit model. But this is just nit-picking.
More importantly, there are many models used by people in the market. Plenty of people use far more sophisticated models. You can’t just say “the market models” without qualification or citation.