5 ms·
>How do we know it's a 75 year event? Because it happened once 75 years before? How often should it happen? We can't honestly answer... We do have models that
by caminante 8y ago
>How do we know it's a 75 year event? Because it happened once 75 years before? How often should it happen? We can't honestly answer...
We do have models that take it into account.
Taleb's argument isn't that you can't model the market, it's that most people aren't using the appropriate models [0].
[0] https://en.wikipedia.org/wiki/Fat-tailed_distribution#Fat_tails_and_risk_estimate_distortions https://en.wikipedia.org/wiki/Fat-tailed_distribution#Fat_ta...
- fromthestart 8y agoInteresting. The gist seems to be that we model market events with normal distributions, which is consistent with what I've seen in other "natural" and/or emergent processes, and this underestimates risk, because the true distribution is fat tailed.
- fnord123 8y agoThis came out in the same year as Taleb's Black Swan: https://www.springer.com/us/book/9781846284199 https://www.springer.com/us/book/9781846284199 Enjoy!