Posts tagged 'Black Swan'

Deep thoughts, by Nassim Nicholas Taleb [updated]

Lisa joined FT Alphaville in September 2011 after a tour of duty through the guts of the financial industry, having worked as an analyst at a bank and for a financial data company.

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| Nov 19 2012 12:39 | Comment |

This FT Alphavillian has a confession to make. When she first started working in finance, she read Nassim Nicholas Taleb’s Fooled by Randomness and was quite taken by it. She recommended it to friends. Choice quotes by the man in the FT were dutifully clipped out and pinned to the cubicle wall — right next to a chart of monoline CDS spreads widening out and a list of biggest SIVs. Such a crisis groupie, we know…

So, what happened to NNT? And at what point did he get a bit “Deep Thoughts, by Jack Handey”? Read more

When the tail-event becomes the standard risk

Izabella Kaminska joined FT Alphaville in October 2008. Before that she worked as a producer at CNBC, a natural gas reporter at Platts and an associate editor of BP's internal magazine.

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| Apr 11 2012 09:27 | Comment |

If anyone can bring metaphor and illustration to the market in volatility,  it’s Chris Cole at Artemis Captial Management, a volatility-focused investment firm.

Take the intro of his latest note as an example: Read more

I think, therefore I am nothing

| May 16 2011 16:51 | Comment |

Perhaps some Deutsche Bank analysts have been into the absinthe.

From a DB research note out Monday: Read more

Commodities VaRy extreme right now

Tracy Alloway used to be deputy editor of FT Alphaville. Here she learned the details of derivatives, the absurdities of accounting and the various structures of ... erm ... structured finance. She now covers big US banks for the FT paper, including Goldman Sachs and Morgan Stanley. She pops up on FT Alphaville every once in a while.

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| May 06 2011 11:14 | Comment |

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. The kind you can wheel out in dinner party conversation. For instance, front-month Brent crude futures sank almost $12 per barrel (or over 9 per cent) on Thursday, leading the market down from over $120 at the start of the day to under $110. Read more

More on that 100,000-year ‘tail risk’

Joseph joined FT Alphaville way back in March 2010. He likes all the politically and legally fiddly bits of finance. He also likes credit, rates, global macro, tail risk, and all that stuff. (You should email him story ideas. He’ll take anything.)

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| Mar 22 2011 12:58 | Comment |

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.

In March 2011, it understandably went viral. Read more

100,000-year ‘tail risk’

Joseph joined FT Alphaville way back in March 2010. He likes all the politically and legally fiddly bits of finance. He also likes credit, rates, global macro, tail risk, and all that stuff. (You should email him story ideas. He’ll take anything.)

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| Mar 18 2011 18:32 | Comment |

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, energy — markets. Read more

Fallout from a flock of Black Swans

Tracy Alloway used to be deputy editor of FT Alphaville. Here she learned the details of derivatives, the absurdities of accounting and the various structures of ... erm ... structured finance. She now covers big US banks for the FT paper, including Goldman Sachs and Morgan Stanley. She pops up on FT Alphaville every once in a while.

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| Mar 18 2011 15:54 | Comment |

What’s that saying?

You wait for a Black Swan for ages and then three show up at the same time? Read more

Black Swan fatigue

Tracy Alloway used to be deputy editor of FT Alphaville. Here she learned the details of derivatives, the absurdities of accounting and the various structures of ... erm ... structured finance. She now covers big US banks for the FT paper, including Goldman Sachs and Morgan Stanley. She pops up on FT Alphaville every once in a while.

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| Mar 08 2011 09:05 | Comment |

We bring up this dangerous malady, because Citi FX strategist Steven Englander does in his latest piece. But first, take a glance at these charts. The first is the S&P 500 — which is almost at the second anniversary of rebounding from its cycle low:

 Read more

Saxo’s outrageous predictions for 2011

Tracy Alloway used to be deputy editor of FT Alphaville. Here she learned the details of derivatives, the absurdities of accounting and the various structures of ... erm ... structured finance. She now covers big US banks for the FT paper, including Goldman Sachs and Morgan Stanley. She pops up on FT Alphaville every once in a while.

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| Dec 20 2010 11:52 | Comment |

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. And, as you might imagine, drawing them up is an admittedly unscientific exercise. Nevertheless, Saxo Bank suggests clients might use them to stress test portfolios, or to think about far out-of-the-money options. Read more

Euro-correlation max

Izabella Kaminska joined FT Alphaville in October 2008. Before that she worked as a producer at CNBC, a natural gas reporter at Platts and an associate editor of BP's internal magazine.

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| Dec 03 2010 09:38 | Comment |

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. Read more

Of sovereign wealth and black swans

Joseph joined FT Alphaville way back in March 2010. He likes all the politically and legally fiddly bits of finance. He also likes credit, rates, global macro, tail risk, and all that stuff. (You should email him story ideas. He’ll take anything.)

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| Aug 24 2010 16:58 | Comment |

Further adventures in sovereign wealth fund knife-catching — of a sort.

We’ve noted before that equity volatility has hampered sovereign wealth fund returns a tad lately. Tuesday’s WSJ offered a glimpse of a potential flip-side to this — SWFs buying protection on even worse reiterations of that volatility. Read more

Pimco engineers ‘Black swan’ protection product

Izabella Kaminska joined FT Alphaville in October 2008. Before that she worked as a producer at CNBC, a natural gas reporter at Platts and an associate editor of BP's internal magazine.

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| Jul 20 2010 10:05 | Comment |

Wall Street’s hottest new product might soon be fear itself, reports Bloomberg. According to the wire, Bill Gross’ Pimco is planning a fund that will make investors; money in the event of market declines of more than 15 per cent. Insurance against low probability events of this type, dubbed ‘Black Swans’ by author and investor Nassim Nicholas Taleb, has been in high demand since the events of 2008, says Bloomberg. The wire cites Morgan Stanley research as noting a fivefold increase in the trading of credit derivatives that speculate on market volatility in that time.  Amongst the latest to launch is Barclays’ inverse S&P 500 VIX Short-Term Futures ETN, which listed as recently as Monday. Read more

Taleb explains his tweets

Tracy Alloway used to be deputy editor of FT Alphaville. Here she learned the details of derivatives, the absurdities of accounting and the various structures of ... erm ... structured finance. She now covers big US banks for the FT paper, including Goldman Sachs and Morgan Stanley. She pops up on FT Alphaville every once in a while.

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| Jun 01 2010 12:32 | Comment |

Nassim Nicholas Taleb, of Black Swan fame, doesn’t just tweet on Twitter. He now tweets the explanations for his Twitter tweets on Twitter. No, really. See FT Alphaville for more. Read more

Thursday’s crash might really have been a Black Swan event

Tracy Alloway used to be deputy editor of FT Alphaville. Here she learned the details of derivatives, the absurdities of accounting and the various structures of ... erm ... structured finance. She now covers big US banks for the FT paper, including Goldman Sachs and Morgan Stanley. She pops up on FT Alphaville every once in a while.

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| May 11 2010 08:15 | Comment |

Did a hedge fund advised by Nassim Taleb cause the Flash Crash? The WSJ notes that a an options bet by the Universa fund might have triggered risk offsets elsewhere, starting a tsunami of hedging sales. Somewhat ironic for the creator of the Black Swan concept, if true, FT Alphaville notes. Read more

Black Swan addendum

Izabella Kaminska joined FT Alphaville in October 2008. Before that she worked as a producer at CNBC, a natural gas reporter at Platts and an associate editor of BP's internal magazine.

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| Jan 25 2010 15:07 | Comment |

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, hopefully, permanently, if the book publishers give me a break). Read more

Black Swan for dummies

Tracy Alloway used to be deputy editor of FT Alphaville. Here she learned the details of derivatives, the absurdities of accounting and the various structures of ... erm ... structured finance. She now covers big US banks for the FT paper, including Goldman Sachs and Morgan Stanley. She pops up on FT Alphaville every once in a while.

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| Oct 26 2009 13:59 | Comment |

Were you fooled by Nassim Nicholas Taleb’s randomness?

Was the Black Swan too dark for your comprehension? Read more

Chasing the fat tail

Tracy Alloway used to be deputy editor of FT Alphaville. Here she learned the details of derivatives, the absurdities of accounting and the various structures of ... erm ... structured finance. She now covers big US banks for the FT paper, including Goldman Sachs and Morgan Stanley. She pops up on FT Alphaville every once in a while.

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| Oct 06 2009 13:43 | Comment |

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. The precise simulation varies from model to model but in general work something like this: define a domain of possible inputs, generate random inputs from the domain, apply some algorithms and then aggregate the results. Read more

Leverage ratios are the new VaR?

Tracy Alloway used to be deputy editor of FT Alphaville. Here she learned the details of derivatives, the absurdities of accounting and the various structures of ... erm ... structured finance. She now covers big US banks for the FT paper, including Goldman Sachs and Morgan Stanley. She pops up on FT Alphaville every once in a while.

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| Sep 11 2009 08:49 | Comment |

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. Read more

The Black Swan battle is about to begin

Tracy Alloway used to be deputy editor of FT Alphaville. Here she learned the details of derivatives, the absurdities of accounting and the various structures of ... erm ... structured finance. She now covers big US banks for the FT paper, including Goldman Sachs and Morgan Stanley. She pops up on FT Alphaville every once in a while.

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| Sep 09 2009 16:55 | Comment |

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, which was meant to measure the maximum loss on a banking portfolio at a given probability and time horizon, in the current financial crisis. Read more

Dragon-king of the outlier events

Tracy Alloway used to be deputy editor of FT Alphaville. Here she learned the details of derivatives, the absurdities of accounting and the various structures of ... erm ... structured finance. She now covers big US banks for the FT paper, including Goldman Sachs and Morgan Stanley. She pops up on FT Alphaville every once in a while.

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| Jul 28 2009 15:25 | Comment |

This is a black swan.

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The notional Taleb

Tracy Alloway used to be deputy editor of FT Alphaville. Here she learned the details of derivatives, the absurdities of accounting and the various structures of ... erm ... structured finance. She now covers big US banks for the FT paper, including Goldman Sachs and Morgan Stanley. She pops up on FT Alphaville every once in a while.

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| Jun 30 2009 09:34 | Comment |

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. In it, Taleb was quoted as having “made $20bn for our clients, half a billion for the Black Swan fund”. Taleb claimed it was a misquote, Tavakoli still appeared suspicious of Taleb’s claimed returns. Read more

We know what the quants did last summer

| May 13 2008 19:07 | Comment |

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: Read more