nntaleb: Finished My Central Paper http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1669317

---------------------------------------------------

Links to pdf download page for:

Convexity, Robustness, and Model Error
Nassim Nicholas Taleb
NYU-Poly
August, 31 2010
Abstract:
This discussion makes the distinction inside the Fourth Quadrant "Black Swan Domain" between fragile an robust to model (or representational) error on the basis of convexity.
• The notion of model error as a convex or concave stochastic variable.
• Why deficit forecasting errors are biased in one direction.
• Why large is fragile to errors.
• How economics as a discipline made the monstrously consequential mistake of treating estimated parameters as nonstochastic variables and why this leads to fat-tails even while using Gaussian models.
• The notion of epistemic uncertainty as embedded in model errors.
In addition, it introduces a simple practical heuristic to measure (as an indicator of fragility) the sensitivity of a portfolio (or balance sheet) to model error. Finally, it sets an explicit path to conduct policy based on robustness

Working Paper Series

nntaleb: The commodification paths: from hunting to farming to artisanry to industry; and from love to marriage to gold-digging to prostitution

nntaleb: The Magnificent, Note 133, www.fooledbyrandomness.com/notebook.htm

nntaleb: Why did the CRISIS Happen?
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1666042

-----------------------------------------------------------

Abstract:
This paper —while a standalone invited essay written for a special crisis issue of New Political Economy — synthesizes the various technical documents by the author as related to the financial crisis. It can also be used as a technical companion to The Black Swan(2007-2010).

Keywords: Black Swan, Risk Management, Finance, Markets, Crisis

nntaleb: The Bed of Procrustes: Philosophical & Practical Aphorisms", N N Taleb (of Amioun), c. Jan 2011 www.fooledbyrandomness.com/aphorisms.pdf

nntaleb: @felixsalmon sees with clarity: http://blogs.reuters.com/felix-salmon/2010/08/16/the-mess-that-is-deposit-insurance/

----------------------------
JohnH-  Excerpt from the article:

The product in question is CDARS, and Blinder is a founder of the company which invented them. When Blinder wrote an op-ed complaining about an attempt to broaden deposit insurance, I was underwhelmed, writing that “Blinder has a massive conflict: he’s the vice-chairman of the company which runs CDARS, a financial instrument designed solely to get around FDIC deposit limits.” Without deposit limits, of course, CDARS become moot, and Blinder loses a large chunk of income.

nntaleb: Why Deficits are dangerous (concave) I explain here: http://www.fooledbyrandomness.com/OxfordBTLecture.pdf

nntaleb: Added derivations of why large will eventually break (& why economists are largely charlatans); www.fooledbyrandomness.com/OxfordBTLecture