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Making Projections into Values: Thoughts on Risk Management

For the purposes of this guide, I’m going to refer to risk in both positive and negative ways. A player will be called “risky” if that player is relatively difficult to forecast – for a host of reasons. This could mean that the player is older, with a real risk of a dramatic decline in performance, or it could mean that the player has a positive factor whose impact is uncertain (e.g. a wide receiver whose team dramatically upgraded at quarterback). I will refer to risk simply as a degree of variance in expected player performance.

Important Note – it is important to realize that this concept is totally independent of adjustments to player forecasts due to factors which might impact performance. For example, take a fantasy basketball center who has a long history of foot injury problems but who is thought to be currently healthy. Say that we would expect this center to have a value of 270 points if he is healthy and misses no games due to injury, and 30 points if he gets injured and misses significant time. The expected value for this player might be 150 points, taking the injury issue into account. Although in a literal sense the reduction in player value from 270 points to 150 points is due to the “risk” of injury, this is not what we are talking about when we discuss the impact of risk on the value of a player. When we think about whether to favor or disfavor this player due to the fact that this player is risky, we intend to start from a player value of 150 – not 270. Here, this player would be riskier than a center who has produced 150 points of value every year for the past five years, although their basic valuation is the same.

Risk is a critical concept in forecasting, which is nonetheless difficult to satisfactorily quantify in fantasy sports player valuation. Some players’ performance histories are varied – showing large spikes and troughs in performance – making them inherently riskier than players with steady, unvarying performance year to year. Players who have no performance history, or small ones, are also much more difficult to predict. Certain factors which affect player valuation may vary widely in their effects – injury history is a good example of this. If a player has a long injury history, but by all reports is currently healthy, then that player could easily play a normal number of games, or just a tiny fraction of the season – a huge degree of variance. A big change in circumstance can often be difficult to quantify precisely, and adds to risk. At the end of the day however, we have only a vague concept of how risky one player is over another. Yes, Peyton Manning might be less risky than Carson Palmer, but by exactly how much? In the absence of clear risk evaluation which we could incorporate into player value, we can only use general guidelines.

As a rule, a team’s high-value players should be as riskless as possible. Sustained success in fantasy sports can only be achieved if the manager spends the bulk of his resources (either auction budget or high draft picks) on players who turn out to have fairly significant value. As a risky player has the potential to have low value, at the expensive end of the player market you would rather have low risk. At the low end however, with players whose value is only marginally above waiver wire, risk is a positive thing.

Over the course of a season, you will probably want to add players from the waiver wire fairly frequently. Circumstances change over the course of a season, and it often happens that player value changes dramatically due to these changes. When waiver wire players become more valuable, they suddenly have the potential to contribute positively to whichever team picks them up first. Because of this, having the flexibility to drop players quickly – and using it liberally -- is a critical part of intra-season management. With this in mind, when selecting your team’s five to seven least valuable players, it is useful to have them be as risky as possible. You will most likely drop most of these players through the course of a season. If these players are all boom-or-bust types, then as the season progresses you will get more information about whether they are a boom or a bust. Some or most will be busts, but that is not a problem – those are the ones you will have available to drop. The idea is to make it so that your low-level players who succeed do so at as high a level of performance as possible. These players are mostly waiver-wire bait anyway – you might as well use these picks to take gambles.

Whether you want to adjust your player values because of risk consideration is up to you – it may make sense to just make some sort of risk notation next to each player in your spreadsheet, and refer to this during the draft.

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