Pablo Triana

Lecturing Birds on Flying (eBook, PDF)

Can Mathematical Theories Destroy the Financial Markets?

• Format: PDF

Produktbeschreibung

LECTURING BIRDS ON FLYING For the past few decades, the financial world has often displayed an unreasonable willingness to believe that "the model is right, the market is wrong," in spite of the fact that these theoretical machinations were largely responsible for the stock market crash of 1987, the LTCM crisis of 1998, the credit crisis of 2008, and many other blow-ups, large and small. Why have both financial insiders (traders, risk managers, executives) and outsiders (academics, journalists, regulators, the public) consistently demonstrated a willingness to treat quantifications as gospel? Nassim Taleb first addressed the conflicts between theoretical and real finance in his technical treatise on options, Dynamic Hedging. Now, in Lecturing Birds on Flying, Pablo Triana offers a powerful indictment on the trustworthiness of financial theory, explaining--in jargon-free plain English--how malfunctions in these quantitative machines have wreaked havoc in our real world. Triana first analyzes the fundamental question of whether financial markets can in principle really be solved mathematically. He shows that the markets indeed cannot be tamed with equations, presenting a long and powerful list of obstacles to prove his point: maverick unlawful human actions rule the markets, unexpected and unimaginable events shape the markets, and historical data is not necessarily a trustworthy guide to the future of the markets. The author then examines the sources of origin of many prevalent theories and mathematical dictums. He details how the field of financial economics evolved from a descriptive discipline to an abstract one dedicated to technically concocting professors' own versions of how such a world should work. He goes on to explain how Wall Street and other financial centers became eager employers of scientists, and how scientists became eager employees of financial firms. Triana concludes with an in-depth discussion of the most significant historical episodes of theory-caused real-life market malaise, with a strong emphasis on the current credit crisis. In the end, Lecturing Birds on Flying calls for the radical substitution of good old-fashioned common sense in place of mathematical decision-making and the restoration to financial power of those who are completely unchained to the iron ball of classroom-obtained qualifications.

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Produktdetails

• Verlag: John Wiley & Sons
• Seitenzahl: 400
• Erscheinungstermin: 14. Mai 2009
• Englisch
• ISBN-13: 9780470501030
• Artikelnr.: 37292896

Autorenporträt

PABLO TRIANA has successful derivatives ex-perience at all levels: on the trading floor and as a professor, consultant, and author. He is a frequent contributor to business publications, including the Financial Times, Forbes.com, Breakingviews.com, and Risk magazine, among others. Triana is also the author of Corporate Derivatives. He holds a master of science from the Stern School of Business, New York University, and a master of arts from American University.

Inhaltsangabe

Foreword xi Preface: An Evening at NYU, Taleb's Article, and a Credit Crisis xix Mathew Gladstein's Complaisance xliii Essentials Chapter 1 Playing God 3
It's tough to model human action
Finance is not as religious as physics
Black Swans make things harder
The markets are not Normal and the past is a faulty guide
Should we care that theorists persist?
Chapter 2 The Financial Economics Fiefdom 29
Virginity matters
When describing reality was okay
It's the incentives, stupid
Many obstacles to reform
Heeding Fischer Black's message
Chapter 3 Quant Invasion 59
Machine learning comes to finance
It's a computational thing
Models live here, too
Quant punting
Interesting enough for a movie
Critique Chapter 4 Copulated Nightmares 93
Abrupt reform, if not so much prison
Modeling death
The 2005 pre-warning
Rating us into hell
A disapproving grin
Chapter 5 Blah VaR Blah 127
Insalubrious charlatanism
Tracking a true culprit
Credit truths
A long rap sheet of evidence
The police are in on it
Chapter 6 Blue is not Green 161
Lehman did die
Anything is possible
Buffett versus the Black Swan
Stubbornly holding the theoretical fort
An end to indoctrination
Chapter 7 The Black-Scholes Conundrum 177
Once upon a time at MIT
Frowning, not smiling
How Black was that Monday
A devastating KO
The Taleb & Haug critique
Conclusions Chapter 8 Black Swan Deceit? 245
The tired "perfect storm" alibi may be a facade
Indoctrinating clients and investors
The unseemly marketers of academic dogma
Do as I say, not as I do
Glorifying complexity
Chapter 9 An Unhealthy Yearning for Precision 267
Dangerous voluntary enslavement
Let freedom ring
Normality can kill you
A VIXing issue
Protect those derivatives
Chapter 10 We Need Fat Tony 297 Finale Should The Nobel Prize in Economics Be Eliminated? 305 Notes 319 Acknowledgments 335 About the Author 337 Index 339

Rezensionen

"fizzing with ideas . . ." -- The Economist