New Taleb book

Discussion in 'Educational Resources' started by ducatista, Jul 27, 2020.

  1. ducatista

    ducatista



    just popped in my feed and seems more technical than his other recent works. some good co-authors too. apparently he made available a free pdf version

    https://arxiv.org/pdf/2001.10488.pdf

    haven't read yet, but figured it was worth a post
     
  2. Skimmed through it, do you need a masters in statistics to get all the technical aspects in the book? I am STEM educated but didn't major in statistics
     
  3. JSOP

    JSOP

    All that is a good read if we get into a complete lockdown again but all we need is ONE statistic: the probability of that Fat tail event happening. I only skimmed through the first few pages and he talked about the consequences of the Fat tail. I can't understand why he chose to dwell on that. If it's a Fat tail, it will be an extreme event. All extreme events will have dire consequences otherwise they wouldn't be qualified as "extreme event" and wouldn't be happening at the "tail" so talking about the consequences is irrelevant. It will be big, we get it. The crux of the issue is how likely it will happen, the probability of it happening.

    Yeah the consequence of Iran launching a nuclear missile at United States will be fatal for the entire planet but what is the probability of that happening? That's what we need to know to decide how much resources to dedicate to surviving that "Fat tail" event.
     
  4. RedDuke

    RedDuke

    I am not sure probability can be calculated. Oil at -37 not too long ago would be impossible one out of billion, and yet we saw it in front of our eyes. We as traders just need to trade with assumption that severe crap can happen, and trade accordingly.
     
    _terminus_ and qlai like this.
  5. ironchef

    ironchef

    How do I "trade accordingly"?

    If tails only happen once a generation, do I just ignore them?
     
  6. RedDuke

    RedDuke

    Just this year alone, how many did we have tails??? They supposed to happen once every 1000 of what ever years. Yet, last 20 years we had so many tails.

    Risk and leverage - must be controlled and used carefully.
     
    _terminus_, ironchef and qlai like this.
  7. ironchef

    ironchef

    Got it. Thanks.

    Instead of controlling risks, how about go hunt for tails since they are priced as rare events yet happen quite often, like the 100 year flood that happens every few years?
     
  8. That's what the hedgefund does where Taleb is involved in afaik
     
  9. ironchef

    ironchef

    OK, how do I do that profitably?
     
  10. That’s the million dollar question isn’t it? Buying far out of the money options at a discounted price would be a general framework
     
    #10     Aug 4, 2020