{"id":34,"date":"2009-06-03T13:12:56","date_gmt":"2009-06-03T20:12:56","guid":{"rendered":""},"modified":"2011-06-16T12:32:01","modified_gmt":"2011-06-16T19:32:01","slug":"ssrn-errors-robustness-and-the-fourth-quadrant-by-nassim-taleb","status":"publish","type":"post","link":"https:\/\/www.blackswanreport.com\/blog\/2009\/06\/ssrn-errors-robustness-and-the-fourth-quadrant-by-nassim-taleb\/","title":{"rendered":"SSRN-Errors, Robustness, and the Fourth Quadrant by Nassim Taleb"},"content":{"rendered":"<blockquote><p>Shared by  Woolwit<br \/>\n<br \/>\nAnother paper written by NNT. PDF available for download at link location.<\/p><\/blockquote>\n<div>Errors, Robustness, and the Fourth Quadrant<\/div>\n<p><center><font face=\"Myriad Roman, Arial, Helvetica, Sans-serif;\" size=\"2\"><br \/><a href=\"http:\/\/papers.ssrn.com\/sol3\/cf_dev\/AbsByAuth.cfm?per_id=475810\" style=\"font-size:14px;font-weight:bold\" title=\"View other papers by this author\">Nassim Nicholas Taleb <\/a><br \/>NYU-Poly Institute; London Business School<br \/><\/font><\/p>\n<p><font face=\"Myriad Roman, Arial, Helvetica, Sans-serif;\" size=\"2\">February 14, 2009<\/font><\/p>\n<p><\/center><br \/><strong><font face=\"Myriad Roman, Arial, Helvetica, Sans-serif;\" size=\"2\">Abstract: <\/font><\/strong>\u00a0\u00a0\u00a0\u00a0<br \/><font face=\"Myriad Roman, Arial, Helvetica, Sans-serif;\" size=\"2\">The paper presents evidence that econometric techniques based on variance- L2 norm are flawed -and do not replicate. The result is un-computability of role of tail events. The paper proposes a methodology to calibrate decisions to the degree (and computability) of forecast error. It classifies decision payoffs in two types: simple payoffs (true\/false or binary) and complex (higher moments); and randomness into type-1 (thin tails) and type-2 (true fat tails) and shows the errors for the estimation of small probability payoffs for type 2 randomness. The Fourth Quadrant is where payoffs are complex with type-2 randomness. We propose solutions to mitigate the effect of the Fourth Quadrant based on the nature of complex systems.<\/font><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Shared by  Woolwit <\/p>\n<p>Another paper written by NNT. PDF available for download at link location.<br \/>\nErrors, Robustness, and the Fourth QuadrantNassim Nicholas Taleb NYU-Poly Institute; London Business SchoolFebruary 14, 2009Abstract: \u00a0\u00a0\u00a0\u00a0The paper pres&#8230;<\/p>\n","protected":false},"author":8,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5,445,73],"tags":[],"class_list":["post-34","post","type-post","status-publish","format-standard","hentry","category-feeds","category-papers","category-pdf"],"_links":{"self":[{"href":"https:\/\/www.blackswanreport.com\/blog\/wp-json\/wp\/v2\/posts\/34","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.blackswanreport.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.blackswanreport.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.blackswanreport.com\/blog\/wp-json\/wp\/v2\/users\/8"}],"replies":[{"embeddable":true,"href":"https:\/\/www.blackswanreport.com\/blog\/wp-json\/wp\/v2\/comments?post=34"}],"version-history":[{"count":2,"href":"https:\/\/www.blackswanreport.com\/blog\/wp-json\/wp\/v2\/posts\/34\/revisions"}],"predecessor-version":[{"id":3665,"href":"https:\/\/www.blackswanreport.com\/blog\/wp-json\/wp\/v2\/posts\/34\/revisions\/3665"}],"wp:attachment":[{"href":"https:\/\/www.blackswanreport.com\/blog\/wp-json\/wp\/v2\/media?parent=34"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.blackswanreport.com\/blog\/wp-json\/wp\/v2\/categories?post=34"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.blackswanreport.com\/blog\/wp-json\/wp\/v2\/tags?post=34"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}