Friends, my collaborator Spyros Makridakis (the debunker of statistical myths) has a piece on hypertension. This is open for discussion:
http://www.fooledbyrandomness.com/makridakis.pdf
Friends, my collaborator Spyros Makridakis…
Leave a reply
No, Small Probabilities are Not ‘Attractive to Sell’: A Comment by Nassim Taleb :: SSRN
No, Small Probabilities are Not ‘Attractive to Sell’: A Comment
Nassim Nicholas Taleb
NYU-Poly
January 5, 2013
Financial Analysts Journal, ForthcomingAbstract: Owing to the convexity of the payoff of out-of-the money options, an extremely small probability of a large deviation unseen in past data justifies rationally buying them, or at least justifies excessive caution in not being exposed to them, particularly those options that are extremely nonlinear in response to market movement or changes in implied volatility. One needs, for instance, a minimum of 2000 years of stock market data to assert that some tail options are “expensive”. The paper presents errors in Ilmanen 2012, which provides an exhaustive list of all arguments in favor of selling insurance on small probability events. The paper goes beyond Ilmanen 2012 and suggests an approach to analyze the payoff and risks of options based on the nonlinearities in the tails.
Number of Pages in PDF File: 5
Download
via No, Small Probabilities are Not ‘Attractive to Sell’: A Comment by Nassim Taleb :: SSRN.
More practically, my new year resolution…
More practically, my new year resolution is to avoid telling imbeciles that they are imbeciles, but never fail to tell fraudsters that they are fraudsters.
Catastrofi da perfezionisti – Il Sole 24 ORE
«Tipicamente le autorità favoriscono una particolare classe di imprese abbastanza grandi da chiedere aiuto. Così facendo si trasferisce la fragilità dal collettivo all’inadatto». Al contrario, per Taleb il comandamento dell’antifragilità è: «non avrai antifragilità a danno della fragilità d’altri».Antifragile è un libro ricchissimo, dove l’autore, filosofo orgogliosamente autodidatta, regola i conti con buona parte del pensiero moderno. Per Taleb «noi non mettiamo in pratica le teorie, ma creiamo teorie dalla pratica»: non c’è bisogno di una laurea in fisica per imparare ad andare in bicicletta. La realtà è fatta di rules of thumbs, di euristiche, setacciate nel succedersi di tentativi ed errori. Per questo Taleb apprezza la robustezza della vecchia common law, diritto “prodotto” dai giudici, citando l’italiano Bruno Leoni, piuttosto che la legislazione pervasiva e “fragilista”. Per questo rivaluta la Svizzera federale come alternativa allo Stato centralizzato, e preferisce l’ordine arruffato ma spontaneo del suk all’algida e vitrea perfezione dei mercati regolati.
English Translation
via Catastrofi da perfezionisti – Il Sole 24 ORE.
Chinese minds move away from conservatism toward antifragility – The China Post
What he calls the central Triad of exposures — Fragile, Robustness and Antifragile — has the analogy in the Chinese trinity of Female (Ying), Golden Mean (中庸) and Male (Yang).
The Confucian concept of Golden Mean seeks to avoid extremes and take the safe middle path.
But Taleb’s insight shows us why the Golden Mean gets people into trouble, because by playing safe, the mainstream ignores the uncertainty of Black Swan events that could eventually damage the system as a whole.
Prudence and conservatism through adopting the Golden Mean prevents the practitioner from adopting “antifragile or good high risk-high payoff” strategies that would compensate for the uncertain unknown bad Black Swan events. A Buddhist would immediately recognize the need to build up good deeds to compensate for the bad deeds that may befall oneself.
By not taking risks, Chinese dynasties that adopted Golden Mean strategies became closed societies that eventually imploded when disaster struck. On the other hand, in the run up to the Industrial Revolution, Western societies took large risks with high payoffs, in science, technology and even colonialism.
via Chinese minds move away from conservatism toward antifragility – The China Post.