Wiki Leaks. Nassim Nicholas Taleb. Black swan theory. The black swan theory or theory of black swan events is a metaphor that describes an event that comes as a surprise, has a major effect, and is often inappropriately rationalized after the fact with the benefit of hindsight.
The theory was developed by Nassim Nicholas Taleb to explain: The disproportionate role of high-profile, hard-to-predict, and rare events that are beyond the realm of normal expectations in history, science, finance, and technology.The non-computability of the probability of the consequential rare events using scientific methods (owing to the very nature of small probabilities).The psychological biases that blind people, individually and collectively, to uncertainty and to a rare event's massive role in historical affairs. Unlike the earlier philosophical "black swan problem", the "black swan theory" refers only to unexpected events of large magnitude and consequence and their dominant role in history. Background[edit] Taleb asserts:[8] Based on the author's criteria: Mathematical and Quantitative Papers. A mixture of my lectures, & musings when I am bored, ranging from probability theory & quantitative finance to computational epistemology.
Collected Published Papers (in One Volume) New Paper on Errors Aims of the lectures: In short, statistics without being an idiot savant. · Pre- asymptotics (all that happens takes place outside the limit), · Inverse Problems (many models can explain the same phenomena), and · Platonicities (the reduction of the fool) are the same illness under different symptoms. Probability theory does not have to be Platonic. You can go from empiricism to formalism --looking for inverse problems and sensitivity to error in the choice of model. Lecture 1 – Platonic convergence & the Central Limit Theorem. Lecture 2 - Preasymptotics & Small Sample Effects of α ≤1 or Saint Petersburgh -Style Infinite First Moment Situations. Lecture 3 - The fundamental problem of the 0th moment and the irrelevance of "naked probability" Lecture 6 - Option Pricing & True Fat tails.
Opacity. Opacity: What We Do Not See A Philosophical Notebook, by Nassim Nicholas Taleb.
The mathematical version is here. Non philosophorum sed philosophiae historiae NNT’s Home Page 154 Bounded, Unbounded, Finite and Infinite Having spent more than two decades, as an option trader and book-runner (~ 650,000 trades), I have always been leery of inexperienced academics talking about "prediction markets" when we have organic, spontaneously formed markets, and have had them since civilization started --my reaction is that of an old plane engineer and pilot being lectured by a high school English student who never flew a plane. But, it turned out, things are worse than that. Every rookie in trading knows that, in your projections about the future, you cannot "cap an outcome", i.e. find an upper bound to it, beyond which no realization is possible, unless there is an organic cap, like a contractual ceiling.
(Technical note: Option theoretical formalization. Members across three generations: P.L. Nassim N. Taleb Home & Professional Page.