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’Commodities VaRy extreme right now
Hark — the standard deviation devils sing (again).
As Reuters columnist John Kemp pointed out yesterday, recent swings in the commodities complex have produced some impressive probabilities figures.
More on that 100,000-year ‘tail risk’
The above is a presentation from a representative of Tokyo Electric Power on the subject of spent fuel storage at the Fukushima nuclear power plant. In November 2010, it was delivered to the IAEA.
100,000-year ‘tail risk’
Ever wondered why there was so much spent fuel in water pools around the Fukushima nuclear plant? We have.
Only we’d never realised the answer’s striking lesson (metaphor?) for tail risk in financial — especially,
Fallout from a flock of Black Swans
What’s that saying?
You wait for a Black Swan for ages and then three show up at the same time?
Citi FX strategist Steven Englander noted last week — just a few days before Japan’s disastrous earthquake sent asset prices swinging — that “investors are tired of being told to hedge against risks that have not emerged.”
Black Swan fatigue
Black·Swan·Fat·igue (n. Abbr. BSF) A form of investment and/or risk management lethargy. Symptoms: General disinclination to hedge against ‘tail risk’ events. An unerring belief that sloshing global liquidity and cooperative policymakers will abet the recovery.
Saxo’s outrageous predictions for 2011
It’s that time of year again.
Saxo Bank — inspired by the black swans of Nassim Taleb — have drawn up their 10 ‘outrageous predictions’ of the year. The idea is that these are unpredictable (eh?) events with potentially massive impact.
Euro-correlation max
Correlation, as we are now well learning, is a phenomenon which increases when market tensions rise.
That is because when investors flock to the exits, they tend to move more uniformly than usual.
So here’s the interesting thing.
Taleb explains his tweets
Nassim Nicholas Taleb, of Black Swan fame, doesn’t just tweet on Twitter.
He now tweets the explanations for his Twitter tweets on Twitter.
So if the below Friday tweet left you in a confused state:
Thursday’s crash might really have been a Black Swan event
Was the world’s most pompous finance commentator and ornithology enthusiast in someway behind the flash crash?
There have been rumours that the order which set of Thursday’s cascade of high-frequency fueled-selling had originated somewhere in Chicago.
Black Swan addendum
A note on Nassim Nicholas Taleb’s website, www.fooledbyrandomness.com, mentions a coming addition to his seminal Black Swan:
PLEASE NOTE THAT I AM ON MEDIA HIATUS Nov 2009 to May 2010 with the 2nd edition of The Black Swan (and perhaps,
Black Swan for dummies
Were you fooled by Nassim Nicholas Taleb’s randomness?
Was the Black Swan too dark for your comprehension?
Was the fourth quadrant off your radar screen?
Never fear, for the Black Swan man himself has penned a paper outlining his rare event-theory idea and “common errors”
Chasing the fat tail
Alternate title: Building a better Monte Carlo model.
Risk managers and investors will, of course, be familiar with Monte Carlo simulations — which are used in finance to value potential loan losses and things like portfolio risk or derivatives.
Leverage ratios are the new VaR?
What happens when you get Rick Bookstaber and Nassim Nicholas Taleb in the same room, to talk about one of the most controversial risk measures of the financial crisis?
They (almost) agree.
The two were speaking in front of the US House of Representatives Committee on Science & Technology,
The Black Swan battle is about to begin
On Thursday, the US House of Representatives Committee on Science & Technology will turn its attention to financial modeling.
Specifically, the committee will be scrutinising the role of the much-maligned Value-at-Risk model,
Dragon-king of the outlier events
This is a black swan.
This is a dragon-king.
Which are you more terrified of?
In a new paper, author and physics professor Didier Sornette, presents the concept of “dragon-kings” — outlier events that exist within conventional power law distributions.
The notional Taleb
Remember the clash between Janet Tavakoli and Nassim Taleb over a profile of the Black Swan man in GQ?
Tavakoli, of Tavakoli Structured Finance, highlighted a seeming error in the GQ article, which was penned by novelist Will Self.
[Vancouver Dispatch] We know what the quants did last summer
What will the quants do next? Judging by presentations at the CFA conference in Vancouver, many think they have worked out what happened to them last August, and believe they have learned the lesson.
The main problems – known well enough by now – as presented by various quants here in Vancouver over the last two days seem to be as follows: