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
Foreword.
Preface: An Evening at NYU, Taleb's Article, and a Credit Crisis.
Mathew Gladstein's Complaisanc.
ESSENTIALS.
CHAPTER 1 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?
CHAPTER 2 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.
CHAPTER 3 QUANT INVASION.
Machine learning comes to finance.
It's a computational thing.
Models live here, too.
Quant punting.
Interesting enough for a movie.
CRITIQUE.
CHAPTER 4 COPULATED NIGHTMARES.
Abrupt reform, if not so much prison.
Modeling death.
The 2005 pre-warning.
Rating us into hell.
A disapproving grin.
CHAPTER 5 BLAH VaR BLAH.
Insalubrious charlatanism.
Tracking a true culprit.
Credit truths.
A long rap sheet of evidence.
The police are in on it.
CHAPTER 6 BLUE IS NOT GREEN.
Lehman did die.
Anything is possible.
Buffett versus the Black Swan.
Stubbornly holding the theoretical fort.
An end to indoctrination.
CHAPTER 7 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.
CHAPTER 8 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.
CHAPTER 9 AN UNHEALTHY YEARNING FOR PRECISION.
Dangerous voluntary enslavement.
Let freedom ring.
Normality can kill you.
A VIXing issue.
Protect those derivatives.
CHAPTER 10 WE NEED FAT TONY.
FINALE SHOULD THE NOBEL PRIZE IN ECONOMICS BE ELIMINATED?
Notes.
Acknowledgments.
About the Author.
Index.
This is a passionate attack on quantitative financial theory and its influence on business schools and the managers of financial institutions. Financial theorists, Pablo Triana says, are like ornithologists whose birdbrained formulas can't even come close to approximating the experience of flight. If you have maintained a regular acquaintance with advances in the financial markets, for example, by reading newspapers, you may already be familiar with Triana's analysis. He relies heavily on the ideas of Nassim Taleb and Emanuel Derman, who explain that people who have experienced improbable events overestimate the chance that such events will recur, while others underestimate it. In this rambling overview, Triana also refers to some of his own previous analyses. He presents a forceful summary of the problems with mathematical economic models. getAbstract finds that he offers good and valuable insights, though not necessarily innovative ones, and recommends his book to investors, financial analysts and thick-skinned economists.
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Posted January 17, 2010
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Overview
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 ...