"Blowup" versus "Bleed": What Does Empirical Psychology Say About the Preference For Negative Skewness?
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Date: 09-18-2003
Start Time:
5:30pm
End Time: 7:00pm
Speaker: Nassim Nicholas Taleb, Empirica Capital LLC.
Location: Math 312
ABSTRACT
Would an economic agent facing a stream of stochastic monetary payoffs elect to
prefer negative skewness? Given a profile of monetary gambles, would he prefer
to ?bleed? (i.e. undergo small but frequent losses) or ?blowup?, i.e., take
severe hits concentrated in small periods of time? The discussion focuses on the
variety of behavioral explanations for the preference for negative
skewness.
Speaker Bio: Nassim Nicholas Taleb is the founder of Empirica
Capital LLC, a volatility laboratory and trading firm, and teaches financial
modeling at the Courant Institute of Mathematical Sciences of New York
University. He held senior trading positions in New York and London and worked
as a floor trader in Chicago. He has an MBA from the Wharton School and a Ph.D.
from University Paris-Dauphine. Taleb is the author of Dynamic Hedging (Wiley,
1997) and the bestselling Fooled by Randomness (Texere, 2001). Taleb's ideas on
the risks of rare events have been featured in close to 200 newspaper articles
in the past 2 years.