Fat Tails

Market returns have fat tails: extreme moves arrive orders of magnitude more often than the bell curve predicts, and a few days decide decades of performance. The response is structural rather than predictive - cap any exposure that dies in a single tail event and distrust risk measures built on volatility alone. Cheap convex payoffs look like wasted premium and are usually underpriced.

9 books · 1 people behind it · 4 resources

Start here

  1. Fooled by RandomnessNassim Nicholas Taleb, 2001
  2. The Black SwanNassim Nicholas Taleb, 2007
  3. The Misbehavior of MarketsBenoit Mandelbrot, Richard L. Hudson, 2004

The people behind it 1

Each person holds a book in this entry or names it in their own tags.

Academics 1

Nassim Nicholas Taleb4 books here

Resources 4

Books 9

Paul Embrechts, Claudia Kluppelberg, Thomas Mikosch · 1997 · The technical reference on extreme value theory for insurance and finance
Didier Sornette · 2002 · Log-periodic power laws as a physicist's model of crash formation
Didier Sornette · 2000 · Power laws, scaling and critical points across physical and social systems