The Misbehavior of Markets: A Fractal View of Risk, Ruin, and Reward

The Misbehavior of Markets: A Fractal View of Risk, Ruin, and Reward

by Benoit B. Mandelbrot, Richard L. Hudson
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Overview

The Misbehavior of Markets: A Fractal View of Risk, Ruin, and Reward by Benoit B. Mandelbrot, Richard L. Hudson

Benoit B. Mandelbrot, one of the century's most influential mathematicians, is world-famous for making mathematical sense of a fact everybody knows but that geometers from Euclid on down had never assimilated: Clouds are not round, mountains are not cones, coastlines are not smooth. To these classic lines we can now add another example: Markets are not the safe bet your broker may claim. In his first book for a general audience, Mandelbrot, with co-author Richard L. Hudson, shows how the dominant way of thinking about the behavior of markets-a set of mathematical assumptions a century old and still learned by every MBA and financier in the world-simply does not work. As he did for the physical world in his classic The Fractal Geometry of Nature , Mandelbrot here uses fractal geometry to propose a new, more accurate way of describing market behavior. The complex gyrations of IBM's stock price and the dollar-euro exchange rate can now be reduced to straightforward formulae that yield a far better model of how risky they are. With his fractal tools, Mandelbrot has gotten to the bottom of how financial markets really work, and in doing so, he describes the volatile, dangerous (and strangely beautiful) properties that financial experts have never before accounted for. The result is no less than the foundation for a new science of finance.

Product Details

ISBN-13: 9780465043552
Publisher: Basic Books
Publication date: 08/02/2004
Pages: 352
Product dimensions: 6.40(w) x 9.54(h) x 1.22(d)

About the Author

Benoit B. Mandelbrot is Sterling Professor of Mathematical Sciences at Yale University and a Fellow Emeritus at IBM's Thomas J. Watson Laboratory. He is the inventor of fractal geometry, whose most famous example, the Mandelbrot Set, has been replicated on millions of posters, T-shirts, and record albums. He was a leading figure in James Gleick's Chaos and has received the Wolf Prize in Physics, the Japan Prize in science and technology, and awards from the U.S. National Academy of Sciences, the IEEE, and numerous universities in the U.S. and abroad. His books include Fractals: Form, Chance and Dimension , which was later expanded into the classic The Fractal Geometry of Nature , which has sold more than 200,000 copies. This is his first book for lay readers on finance, a subject he has studied since the 1960s. He lives in Scarsdale, New York. Richard L. Hudson was the managing editor of the Wall Street Journal's European edition for six years, and a Journal reporter and editor for twenty-five years. He is a 1978 graduate of Harvard University and a 1991 Knight Fellow of MIT. He lives in Brussels, Belgium.

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The Misbehavior of Markets: A Fractal View of Risk, Ruin and Reward 4 out of 5 based on 0 ratings. 10 reviews.
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The fundamental fractal concept applied to the behavior of markets offers most promising insights. This book takes you on the right track because as you may see from Savov¿s theory of interaction the texture of reality is made of multiscale fractal like 3D-spiral swirls of basic matter that contract and expand, i.e. show ups and downs like everything around us, including prices. Therefore Mandelbrot¿s fractal eye on the dynamics of the markets has its much deeper justification in theory of interaction terms.
Guest More than 1 year ago
Finance is a difficult and recondite subject, perhaps second only to mathematics in its inability to inspire excitement in most readers. Yet Benoit Mandelbrot and Richard L. Hudson, co-authors of this book, manage to turn financial math into a great yarn, full of interesting characters and dramatic events. Some of what the book actually says will be old news to market professionals, but it says it quite interestingly. Mandelbrot did some of his most important financial work in the 1960s, but his ideas about leptokurtosis (which deals with the shape of probability functions), fractals (which deal with repetitive patterns) and such have received quite a bit of subsequent attention in trading rooms and in the finance departments of major universities. So, perhaps, it is merely a dramatic device that this book presents Mandelbrot as a solitary, clear-thinking prophet struggling against a blind and hostile economic orthodoxy. That presentation certainly succeeds as drama ¿ the story races along and the reader keeps rooting harder and harder for Mandelbrot to win. The co-authors have spun an excellent saga that says important things in a new way. We think every investor, every business journalist and every financial professional ought to read this book.