Lecturing Birds on Flying: Can Mathematical Theories Destroy the Financial Markets?

by Pablo Triana; Foreword by: Nassim Nicholas Taleb

• ISBN13: 9780470501047
• ISBN10: 0470501049
• Format: eBook
• Copyright: 2009-06-01
• Publisher: Wiley

Summary

Praise for Lecturing Birds On Flying "Finally, a book taking a critical look at quantitative finance models, illuminating both their flawed fantasy assumptions as well as the uncritical use of such models on Wall Street, in many cases, leading to billion dollar losses. Pablo Triana knows both the financial industry and the academic community from the inside. A must-read for anyone interested in finance." - Dr. Espen Gaarder Haug, trader, thinker, and author of Derivatives Models on Models "A thoroughly readable explanation of the problems that have beset the models and quantitative techniques that have underpinned so much of finance in recent years. If only the bankers had heeded this message a few years before, we might not be in such a big mess today." - Gillian Tett, Assistant Editor of the Financial Times, overseeing global financial markets coverage, and author of Fool's Gold "Pablo Triana dismembers quantitative finance, in theory and in practice, with expertise, anger,and an excellent eye for the illuminating anecdote. By the time he has finished marshalling his evidence, his call to replace complex equations with something more like common sense sounds like, well, common sense." - Edward Hadas, Assistant Editor at Breakingviews.com; and author of Human Goods, Economic Evils: A Moral Approach to the Dismal Science "Pablo Triana is an entertaining and engaging writer, even on the dry subject of finance theory. His debunking of conventional wisdom is a treat." - Pauline Skypala, Editor, FTfm, Financial Times "Triana's book is an unrelenting fusillade of detailed and irrefutable arguments against financial theorems and those who teach them. It should, by rights, spark a revolution in both investment banks and business schools. But, at the very least, it is required reading for anyone who would regulate the finance industry." - Felix Salmon, Finance Blogger, Reuters

Table of Contents

Foreword

Preface: An Evening at NYU, Taleb's Article, and a Credit Crisis

Mathew Gladstein's Complaisanc

Essentials

Playing God

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?

The Financial Economics Fiefdom

Virginity matters

When describing reality was okay

It's the incentives, stupid

Many obstacles to reform

Heeding Fischer Black's message

Quant Invasion

Machine learning comes to finance

It's a computational thing

Models live here, too

Quant punting

Interesting enough for a movie

Critique

Copulated Nightmares

Abrupt reform, if not so much prison

Modeling death

The 2005 pre-warning

Rating us into hell

A disapproving grin

Blah VaR Blah

Insalubrious charlatanism

Tracking a true culprit

Credit truths

A long rap sheet of evidence

The police are in on it

Blue Is Not Green

Lehman did die

Anything is possible

Buffett versus the Black Swan

Stubbornly holding the theoretical fort

An end to indoctrination

The Black-Scholes Conundrum

Once upon a time at MIT

Frowning, not smiling

How Black was that Monday

A devastating KO

The Taleb & Haug critique

Conclusions

Black Swan Deceit?

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

An Unhealthy Yearning For Precision

Dangerous voluntary enslavement

Let freedom ring

Normality can kill you

A VIXing issue

Protect those derivatives

We Need Fat Tony

Finale

Should The Nobel Prize In Economics Be Eliminated?

Notes

Acknowledgments

About the Author

Index

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