Nassim kicks off The Bank of England’s One Bank Flagship Seminar, the first such seminar offered by the bank in an effort at greater transparency:
The first part of this talk – The Law of Large Numbers in the Real World – presents fat tails, defines them, and shows how the conventional statistics fail to operate in the real world, particularly with econometric variables, for two main reasons: 1) we need a lot, a lot more data for fat tails; and 2) we are going about estimators the wrong way. The second part – Detecting Fragility – presents heuristics to detect fragility in portfolios. Fragility is shown to be ‘anything that is harmed by volatility’. The good news is that while (tail) risk is not measurable, fragility is.
Nassim and Paul Wilmott are offering their “infamous” two-day seminar “Quantitative Risk Management: In Theory and In Practice” on March 12th and 13th, in London. Here are the points that will be addressed:
What is risk?
What are fat tails?
The idea of fragility and how to measure it
Size and scaling
The law of large numbers in the real world
What is complexity?
How to price options using different distributions
How to simulate fat tails
How to measure model risk
How not to measure model risk
Sometimes it’s wrong to use probabilities
The concept of delta-alpha
The commonest quant mistakes
The Greeks that give you false hope
Why calibration does not work
The dangers of correlation
The importance of nonlinearity
What commonsense tells you about volatility, and turning that into a model
Why simple models are often the best and why too much math can be dangerous
A summary of what to do and where the real world is different
This debate with Niall Ferguson, CEO of Pepsico Indra Nooyi was detailed in the chapter “The Antifragility and Ethics of (Large) Corporations” in Antifragile. Google CEO Eric Schmidt joined the discussion towards the end. Walter Isaacson moderates.