Nassim Taleb Bloomberg Quant Finance summary and notes
May 29th 2015 Bloomberg Quant Finance Seminar:
Nassim Taleb Presented ‘The Law of Large Numbers in the Real World’
– Fat Tails exist can be described by some negative exponent Alpha
– The Tail or Alpha distribution is Normal even though the Price
and Return distributions are not ( Use Pareto or Power Law Distribution for them, 80/20 Rule)
– Minimum sample space needed for convergence to a stable moment: Normal – 30, Pareto – 10^14 (100 Trillion)
– Asked Nassim about what type of historical financial data he used
He responded that I should take a look at his paper. But I suspect it is mostly monte carlo generated data. I didn’t find any specific data sources yet. But he claimed to be able to capture the fat tail
behavior of the SPX, by finding a stable moment in the power law
distribution, K*Alpha* X^ -Alpha
– Julien Guyon (Author: NonLinear Option Pricing) didn’t think there
was any info on how to price options in Nassim’s Lecture.
– Any distribution using a financial time series sample space
would be finite and thin-tailed with compact support in time and price.
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