Stalking the Black Swan

Stalking the Black Swan

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Kenneth A. Posner spent close to two decades as a Wall Street analyst, tracking the so-called qspecialty financeq sector, which included controversial companies such as Countrywide, Fannie Mae, Freddie Mac, CIT, and MasterCarda mdash;many of which were caught in the subprime mortgage and capital markets crisis of 2007. While extreme volatility is nothing new in finance, the recent downturn caught many off guard, indicating that the traditional approach to decision making had let them down. Introducing a new framework for handling and evaluating extreme risk, Posner draws on years of experience to show how decision makers can best cope with the qBlack Swansq of our time. Posner's shrewd assessment combines the classic fundamental research approach of Benjamin Graham and David Dodd with more recent developments in cognitive science, computational theory, and quantitative finance. He outlines a probabilistic approach to decision making that involves forecasting across a range of scenarios, and he explains how to balance confidence, react accurately to fast-breaking information, overcome information overload, zero in on the critical issues, penetrate the information asymmetry shielding corporate executives, and integrate the power of human intuition with sophisticated analytics. Emphasizing the computational resources we already have at our disposala mdash;our computers and our mindsa mdash;Posner offers a new track to decision making for analysts, investors, traders, corporate executives, risk managers, regulators, policymakers, journalists, and anyone who faces a world of extreme volatility.the statistical significance of my model, the availability of fresh data, and the long history of research into the credit cycle. ... Recognizing Asymmetric Outcomes One of the benefits of a range of scenarios is that it may help the analyst recognize asymmetric outcomes. ... Positive asymmetries mean that the upside branches of the tree are likelier than the downside, or, alternatively, the value estimatesanbsp;...

Title:Stalking the Black Swan
Author:Kenneth A. Posner
Publisher:Columbia University Press - 2010-04-22


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