The only problem is that VaR calculations look at the past, not future, and when we get a forced global economic shutdown as a result of a viral pandemic which sends the VIX above 80, VaR models tend to... fail.

That's what happened with the two largest European banks HSBC and BNP, whose risk limits were brutally and repeatedly violated in March as unprecedented market volatility made a mockery out of the banks' estimates on how much they could lose or gain on their trading desks.

According to Bloomberg calcualtions, Europe's two biggest banks exceeded their value-at-risk, or VaR limits, a measure of risk used to calculate how much capital they need to hold against potential losses, more times in March than over several years during calmer times.

In March alone, London-based HSBC's trading models breached the daily expected profit-and-loss threshold 12 times, while French megabank BNP Paribas, which suffered hundreds of millions in losses on its various equity derivative products as discussed previously, reported nine such violations during the same quarter, close to a third of all such instances reported since 2007.