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birdwatcherЖивого Талеба дают.
What happens, if you teach people portfolio theory, OK, and this is what they do, they stand around teaching portfolio theory and then they tell you sometimes it doesn't work. Effectively, the impact of the days when it doesn't work dwarfs the impact of the days when it works, so in other words, the exception determines everything in the markets. And if they were to teach these exceptions, it would, number one, disqualify them, you know, because portfolio theory and what we use, like sigma, variance, beta, schmeta, all these things don't work, OK and so it would be incompatible for them to tell you there are crises, this is what shapes they have, this is what happens, and at the same time teach you portfolio theory.
BONUS: Traders were trading options in a very smart way for a long time before, you see. So we went back through history and effectively, discovered that since 1870, traders have been able to price options, taking into account possibility of catastrophes. [...] And we teach each other and once in a while there's an interruption because like the war. We had - the war of 1914 killed option trading for a while and then things resumed and then the second war killed options trading again. We found German sources. These guys figured out everything we know today, literally, OK, about option trading, all the tricks that we traders know today, they figured out how to do arbitrages and all that, how to price options.
What happens, if you teach people portfolio theory, OK, and this is what they do, they stand around teaching portfolio theory and then they tell you sometimes it doesn't work. Effectively, the impact of the days when it doesn't work dwarfs the impact of the days when it works, so in other words, the exception determines everything in the markets. And if they were to teach these exceptions, it would, number one, disqualify them, you know, because portfolio theory and what we use, like sigma, variance, beta, schmeta, all these things don't work, OK and so it would be incompatible for them to tell you there are crises, this is what shapes they have, this is what happens, and at the same time teach you portfolio theory.
BONUS: Traders were trading options in a very smart way for a long time before, you see. So we went back through history and effectively, discovered that since 1870, traders have been able to price options, taking into account possibility of catastrophes. [...] And we teach each other and once in a while there's an interruption because like the war. We had - the war of 1914 killed option trading for a while and then things resumed and then the second war killed options trading again. We found German sources. These guys figured out everything we know today, literally, OK, about option trading, all the tricks that we traders know today, they figured out how to do arbitrages and all that, how to price options.
