DYNAMIC HEDGING NASSIM TALEB PDF

Dynamic Hedging. Then I began to write this book Like george Soros I believed in a greater uncertainty principle more acute than Heisenbergs that largely invalidates social science theories based on physics-like methodology and weakens the notion of modeling outside of the natural sciences. My other argument against being scientific was that, even if it were a science,"option theory while perhaps on the right track would be too young to be reliable. I then needed to warn the public and the regulators against taking an unseasoned and new field and applying some of its still misspecified models to reality. I am convinced that the financial system is largely threatened by the proliferation of risk management advisory services run by former scientists who bullied their way into financial markets.

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Start your review of Dynamic Hedging. Write a review Shelves: non-fiction , finance Do you remember reading The Divine Comedy and getting finally to the part where the two poets apparently on an extended smoke break from their barista jobs in Brooklyn get to the ninth circle of Hell only to think to yourself, "Brutus and Cassius? I mean Judas I totally get, and these guys are distasteful and all, but the inner circle?

We may forgive Signor Alighieri for his error, for he was Do you remember reading The Divine Comedy and getting finally to the part where the two poets apparently on an extended smoke break from their barista jobs in Brooklyn get to the ninth circle of Hell only to think to yourself, "Brutus and Cassius?

We may forgive Signor Alighieri for his error, for he was born years too early to recognize the ominously darkened visage of Nassim Nicholas Taleb next to the ludicrously grinning mug of Paul Wilmott as they bookend Judas Iscariot for all of eternity.

But I digress The thing is that this book is bad. Really bad, and in need of an editor. He says in the preface that he "clambered up to my attic where, during 6 entire months, I spent 14 hours a day, 7 days a week immersed in probability at a Ph.

Then I began to write this book. Note that the " at a Ph. The good Dr. There was an apparently straight-faced claim that we should care about the seventh derivatives of our options positions, which seems more than a bit ludicrous.

All this was interspersed with asides in grey boxes that completely disrupted the flow of the text. Honestly, the best way to read the book is probably to read the grey boxes and nothing else. Taleb, despite his claims of hour marathon mathematical musings cannot seem to make up his mind if he is a mathematician, a trader, or both. The only thing that is clear is that he believes himself to be above all of them.

This book is not without a following, which to me is very odd. I suspect it originates from the lack of other books on the subject at the time of its publication. Taleb does manage to point out convincingly by beating you over the head with it for pages that nonlinear instruments carry with them risks that linear ones do not. Still, the amount of intuition garnered about how to deal with, or even think about such things contained in Dynamic Hedging is tiny compared with, for example, the books by Sheldon Natenberg or Lawrence G.

Lots of people write bad books, so what is it that qualifies Mess. The ninth circle of hell is about betrayal, and these gentlemen have repeatedly run roughshod over the very people who would be their biggest champions: quants. They need you to believe that all quants follow models blindly and without question in order for you to be impressed by the fact that they themselves do not.

The thing is, Nassim Taleb is a very smart guy the jury is totally out on Wilmott. His approaches seem sound. If he had just held the scimitar aloft and said, "let us slay the black swan," then I assume that lots of quants would have been there with him sparking up the torches and sharpening the pitchforks. Instead, he chose to demonize his own kind in order to stand even farther apart.

Et tu, Nassim? Wilmott plays his own insidious version of this game. In many ways, his is worse. Whereas Taleb wants to be recognized for his genius, Wilmott wants to be paid for it. So what do we do with these two poster boys for Muchausen-Syndrome-by-Proxy? I say call it like you see it. Not every book that sells well is a great one.

That liquid splashing your ear is not rain, my friend.

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Tag: dynamic hedging

Taleb disagrees with Platonic i. Based on these and other constructions, he advocates for what he calls a "black swan robust" society, meaning a society that can withstand difficult-to-predict events. He argues that knowledge and technology are usually generated by what he calls " stochastic tinkering" rather than by top-down directed research, [57] [58] and has proposed option-like experimentation as a way to outperform directed research as a method of scientific discovery, an approach he terms convex tinkering. Discussing the ludic fallacy in The Black Swan, he writes, "The dark side of the moon is harder to see; beaming light on it costs energy. In the same way, beaming light on the unseen is costly, in both computational and mental effort.

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