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[PODCAST] The Wharton School: Nassim Taleb on Living with Black Swans (2011)

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Knowledge@Wharton: Nassim Taleb on Living with Black Swans

Nassim Taleb is a literary essayist, hedge fund manager, derivatives trader and professor of risk engineering at The Polytechnic Institute of New York University. But he is best known these days as the author of The Black Swan: The Impact of the Highly Improbable. During a recent visit to Wharton as part of The Goldstone Forum, he spoke with Wharton finance professor Richard Herring — who taught Taleb when he was a Wharton MBA student — about events in the Middle East, the oil supply, investing in options, the U.S. economy, the dollar, health care and of course, black swans.

Risk Neutral Option Pricing Without Dynamic Hedging, A Measure-Theoretic Proof

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Abstract: Proof that under constraints of Put-Call Parity, the probability measure for the valuation of a European option is risk neutral under any general probability distribution, bypassing the Black-Scholes-Merton dynamic hedging argument, and without the requirement of complete markets. The heuristics used by traders for centuries are both more robust and more rigorous than held in the economics literature.

http:// www. fooled by randomness. com/ Option Pricing. pdf

Nassim Taleb interview with John Dawson on Bloomberg TV’s First Up for Barclays Asia Forum in Hong Kong

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Nov. 14 (Bloomberg) — Nassim Nicholas Taleb, a professor at New York University and author of “The Black Swan” and “Antifragile: Things That Gain From Disorder,” talks about risks created by government debt and Federal Reserve monetary policy. He speaks with John Dawson on Bloomberg Television’s “First Up” on the sidelines of Barclays Asia Forum in Hong Kong. (Source: Bloomberg)

SSRN: Constantine Sandis & Nassim Nicholas Taleb – The Skin In The Game Heuristic for Protection Against Tail Events

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The Skin In The Game Heuristic for Protection Against Tail Events

Constantine Sandis
Oxford Brooks

Nassim Nicholas Taleb
NYU-Poly; Université Paris I Panthéon-Sorbonne – Centre d’Economie de la Sorbonne (CES)

July 30, 2013

Abstract:
Standard economic theory makes an allowance for the agency problem, but not the compounding of moral hazard in the presence of informational opacity, particularly in what concerns high-impact events in fat tailed domains. But the ancients did; so did many aspects of moral philosophy. We propose a global and morally mandatory heuristic that anyone involved in an action which can possibly generate harm for others, even probabilistically, should be required to be exposed to some damage, regardless of context. While perhaps not sufficient, the heuristic is certainly necessary hence mandatory. It is supposed to counter risk hiding and transfer in the tails. We link the rule to various philosophical approaches to ethics and moral luck.

http:// papers. ssrn. com/ sol3/ papers.cfm? abstract_id=2298292

EconTalk with Russ Roberts: Taleb on Skin in the Game

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econ-talk-library-of-economics-and-liberty-nassim-talebNassim Taleb of NYU-Poly talks with EconTalk host Russ Roberts about his recent paper (with Constantine Sandis) on the morality and effectiveness of “skin in the game.” When decision makers have skin in the game–when they share in the costs and benefits of their decisions that might affect others–they are more likely to make prudent decisions than in cases where decision-makers can impose costs on others. Taleb sees skin in the game as not just a useful policy concept but a moral imperative. The conversation closes with some observations on the power of expected value for evaluating predictions along with Taleb’s thoughts on economists who rarely have skin in the game when they make forecasts or take policy positions.

Website: http:// www. econtalk. org/ archives/ 2013/ 09/ taleb_ on_ skin_i. html
Direct Link (mp3): http:// files. liberty fund. org/ econtalk / y2013 /Taleb skin. mp3
Link to the Paper: http:// papers. ssrn. com/ sol3/ papers.cfm? abstract_id= 2298292