First, the purpose of VAR is not to describe the worst possible outcomes. It is simply to provide an estimate of the range of possible gains and losses. Many derivatives disasters have occurred because senior management did not inquire about the first-order magnitude of the bets being taken. Take the case of Orange County, for instance. There was no regulation that required the portfolio manager, Bob Citron, to report the risk of the $7.5 billion investment pool. As a result, Citron was able to make a big bet on interest rates that came to a head in December 1994, when the county declared bankruptcy and the portfolio was liquidated at a loss of $1.64 billion. Had a VAR requirement been imposed on Citron, he would have been forced to tell investors in the pool: "Listen, I am implementing a triple-legged repo strategy that has brought you great returns so far. However, I have to tell you that the risk of the portfolio is such that, over the coming year, we could lose at least $1.1 billion in one case out of 20.