Statistical Consequences of Fat Tails

Statistical Consequences of Fat Tails

This book, the first volume of the Technical Incerto, weaves a narrative around published journal articles.

Author: Nassim Nicholas Taleb

Publisher:

ISBN: 1544508050

Category:

Page:

View: 230

The book investigates the misapplication of conventional statistical techniques to fat tailed distributions and looks for remedies, when possible. Switching from thin tailed to fat tailed distributions requires more than "changing the color of the dress." Traditional asymptotics deal mainly with either n=1 or n=∞, and the real world is in between, under the "laws of the medium numbers"-which vary widely across specific distributions. Both the law of large numbers and the generalized central limit mechanisms operate in highly idiosyncratic ways outside the standard Gaussian or Levy-Stable basins of convergence. A few examples: - The sample mean is rarely in line with the population mean, with effect on "naïve empiricism," but can be sometimes be estimated via parametric methods. - The "empirical distribution" is rarely empirical. - Parameter uncertainty has compounding effects on statistical metrics. - Dimension reduction (principal components) fails. - Inequality estimators (Gini or quantile contributions) are not additive and produce wrong results. - Many "biases" found in psychology become entirely rational under more sophisticated probability distributions. - Most of the failures of financial economics, econometrics, and behavioral economics can be attributed to using the wrong distributions. This book, the first volume of the Technical Incerto, weaves a narrative around published journal articles.
Categories:

Control Performance Assessment Theoretical Analyses and Industrial Practice

Control Performance Assessment  Theoretical Analyses and Industrial Practice

J. 16(7), 1998–2003 (2016) Taleb, N.N.: Real-world Statistical Consequences of Fat Tails: Papers and Commentary. STEM Academic Press, Technical Incerto ...

Author: Paweł D. Domański

Publisher: Springer Nature

ISBN: 9783030235932

Category: Technology & Engineering

Page: 367

View: 581

This book presents a comprehensive review of currently available Control Performance Assessment methods. It covers a broad range of classical and modern methods, with a main focus on assessment practice, and is intended to help practitioners learn and properly perform control assessment in the industrial reality. Further, it offers an educational guide for control engineers, who are currently in high demand in the industry. The book consists of three main parts. Firstly, a comprehensive review of available approaches is presented and discussed. The classical canon methods are extended with a discussion of nonlinear and complex alternative measures using non-Gaussian statistics, persistence and fractional calculations. Secondly, the methods’ applicability aspects are visualized with the aid of computer simulations, covering the most popular control philosophies used in the process industry. Lastly, a critical review of the methods discussed, on the basis of real-world industrial examples, rounds out the coverage.
Categories: Technology & Engineering

Unifying Themes in Complex Systems IX

Unifying Themes in Complex Systems IX

The Statistical Consequences of Fat Tails, vol. 1 (2018). www.fooledbyrandomness.com Einmahl, J., Einmahl, J., de Haan, L.: Limits to Human Life Span ...

Author: Alfredo J. Morales

Publisher: Springer

ISBN: 9783319966618

Category: Science

Page: 506

View: 822

Unifying Themes in Complex Systems is a well-established series of carefully edited conference proceedings that serve to document and archive the progress made regarding cross-fertilization in this field. The International Conference on Complex Systems (ICCS) creates a unique atmosphere for scientists from all fields, engineers, physicians, executives, and a host of other professionals, allowing them to explore common themes and applications of complex systems science. With this new volume, Unifying Themes in Complex Systems continues to establish common ground between the wide-ranging domains of complex systems science.
Categories: Science

Nonlinear Dynamics and Control

Nonlinear Dynamics and Control

Taleb, N.N.: Real-World Statistical Consequences of Fat Tails: Papers and Commentary, Technical Incerto Collection. STEM Academic, Rockville (2018) Impact ...

Author: Walter Lacarbonara

Publisher: Springer Nature

ISBN: 9783030347475

Category: Science

Page: 349

View: 212

This second of three volumes from the inaugural NODYCON, held at the University of Rome, in February of 2019, presents papers devoted to Nonlinear Dynamics and Control. The collection features both well-established streams of research as well as novel areas and emerging fields of investigation. Topics in Volume II include influence of nonlinearities on vibration control systems; passive, semi-active, active control of structures and systems; synchronization; robotics and human-machine interaction; network dynamics control (multi-agent systems, leader-follower dynamics, swarm dynamics, biological networks dynamics); and fractional-order control.
Categories: Science

Globalization Gating and Risk Finance

Globalization  Gating  and Risk Finance

By the same token, the thickness of a tail—the index of kurtosis—is an ... 2.2.3 Outliers, Extreme Statistics, and Fat Tails Outliers are events in a ...

Author: Unurjargal Nyambuu

Publisher: John Wiley & Sons

ISBN: 9781119252658

Category: Business & Economics

Page: 496

View: 205

An in-depth guide to global and risk finance based on financial models and data-based issues that confront global financial managers. Globalization, Gating, and Risk Finance offers perspectives on global risk finance in a world with economies in transition. Developed from lectures and research projects investigating the consequences of globalization and strategic approaches to fundamental economics and finance, it provides an approach based on financial models and data; it includes many case-study problems. The book departs from the traditional macroeconomic and financial approaches to global and strategic risk finance, where economic power and geopolitical issues are intermingled to create complex and forward-looking financial systems. Chapter coverage includes: Globalization: Economies in Collision; Data, Measurements, and Global Finance; Global Finance: Utility, Financial Consumption, and Asset Pricing; Macroeconomics, Foreign Exchange, and Global Finance; Foreign Exchange Models and Prices; Asia: Financial Environment and Risks; Financial Currency Pricing, Swaps, Derivatives, and Complete Markets; Credit Risk and International Debt; Globalization and Trade: A Changing World; and Compliance and Financial Regulation. Provides a framework for global financial and inclusive models, some of which are not commonly covered in other books. Considers risk management, utility, and utility-based multi-agent financial theories. Presents a theoretical framework to assist with a variety of problems ranging from derivatives and FX pricing to bond default to trade and strategic regulation. Provides detailed explanations and mathematical proofs to aid the readers’ understanding. Globalization, Gating, and Risk Finance is appropriate as a text for graduate students of global finance, general finance, financial engineering, and international economics, and for practitioners.
Categories: Business & Economics

Statistical Methods in Healthcare

Statistical Methods in Healthcare

... defined by probability distributions with fat tails. In the first layer, exceptions occur without significant consequences since they are predictable.

Author: Frederick W. Faltin

Publisher: John Wiley & Sons

ISBN: 9781119942047

Category: Medical

Page: 520

View: 687

In recent years the number of innovative medicinal products and devices submitted and approved by regulatory bodies has declined dramatically. The medical product development process is no longer able to keep pace with increasing technologies, science and innovations and the goal is to develop new scientific and technical tools and to make product development processes more efficient and effective. Statistical Methods in Healthcare focuses on the application of statistical methodologies to evaluate promising alternatives and to optimize the performance and demonstrate the effectiveness of those that warrant pursuit is critical to success. Statistical methods used in planning, delivering and monitoring health care, as well as selected statistical aspects of the development and/or production of pharmaceuticals and medical devices are also addressed. With a focus on finding solutions to these challenges, this book: Provides a comprehensive, in-depth treatment of statistical methods in healthcare, along with a reference source for practitioners and specialists in health care and drug development. Offers a broad coverage of standards and established methods through leading edge techniques. Uses an integrated, case-study based approach, with focus on applications. Looks at the use of analytical and monitoring schemes to evaluate therapeutic performance. Features the application of modern quality management systems to clinical practice, and to pharmaceutical development and production processes. Addresses the use of modern Statistical methods such as Adaptive Design, Seamless Design, Data Mining, Bayesian networks and Bootstrapping that can be applied to support the challenging new vision. Practitioners in healthcare-related professions, ranging from clinical trials to care delivery to medical device design, as well as statistical researchers in the field, will benefit from this book.
Categories: Medical

Analysis of Catastrophes and Their Public Health Consequences

Analysis of Catastrophes and Their Public Health Consequences

The probability density function of a fat-tailed distribution, ... The statistic of importance for these determinations is the moment generating function of ...

Author: Paolo F. Ricci

Publisher: Springer Nature

ISBN: 9783030480660

Category: Medical

Page: 187

View: 108

Public health policy prospectively and retrospectively addresses the consequences of events ranging from the commonplace to the catastrophic. Informing policymakers and stakeholders by enhancing their understanding of complex causation to justify remedial or precautionary actions is a critical science-policy task. In this book, the key aspects of catastrophes (regardless of their nature) and routine events are identified through a common framework for their analyses, and the analyses of the consequences associated with the potential occurrence of these events also are discussed. The book is not about disaster planning; instead, it is focused on analysis and causation in the context of informing – rather than formulating – public health policy. The author aggregates and fuses scientific information and knowledge in public health policy-science using alternative but complementary methods. The book first focuses on the analysis of catastrophes and commonplace events; the focus then shifts to causal models of multifactorial diseases, particularly at low doses or dose-rates, associated with these events. Topics explored among the chapters include: Policy and Legal Aspects of Precautionary Choices Catastrophes, Disasters, and Calamities: Concepts for Their Assessment Uncertainty: Probabilistic and Statistical Aspects Aggregating Judgments to Inform Precautionary Decision-making The aim of the book is to show that the analyses of events are fundamentally similar, regardless of whether the concern is a global catastrophe or commonplace. Analysis of Catastrophes and Their Public Health Consequences is a text that should engage students, instructors, and researchers in public health, science policy, and preparedness research, as well as serve as a useful resource for policy analysts, practitioners, and risk managers.
Categories: Medical

Advances in Solid State Physics

Advances in Solid State Physics

Fat Tail Statistics and Beyond Joachim Peinke', Malte Siefert', Stephan Barth", ... On the other side, such statistics have very important consequences for ...

Author: Bernhard Kramer

Publisher: Springer

ISBN: 9783540399704

Category: Science

Page: 566

View: 512

This Volume 44 of Advances in Solid State Physics contains the written versions of most of the invited lectures of the Spring Meeting of the Condensed Matter Physics section of the Deutsche Physikalische Gesellschaft held from March 8 to 12, 2004 in Regensburg, Germany. Many of the topical talks given at the numerous and very lively symposia are also included. They have covered extremely interesting and timely subjects. Thus the book truly reflects the status of the field of solid state physics in 2004, and indicates its importance, not only in Germany but also internationally.
Categories: Science

Robust Simulation for Mega Risks

Robust Simulation for Mega Risks

... statistical variances, the entire distribution of gains and losses (stochastic dominance), the almost stochastic dominance, fat-tail reduction models, ...

Author: Craig E. Taylor

Publisher: Springer

ISBN: 9783319194134

Category: Nature

Page: 164

View: 881

This book introduces a new way of analyzing, measuring and thinking about mega-risks, a “paradigm shift” that moves from single-solutions to multiple competitive solutions and strategies. “Robust simulation” is a statistical approach that demonstrates future risk through simulation of a suite of possible answers. To arrive at this point, the book systematically walks through the historical statistical methods for evaluating risks. The first chapters deal with three theories of probability and statistics that have been dominant in the 20th century, along with key mathematical issues and dilemmas. The book then introduces “robust simulation” which solves the problem of measuring the stability of simulated losses, incorporates outliers, and simulates future risk through a suite of possible answers and stochastic modeling of unknown variables. This book discusses various analytical methods for utilizing divergent solutions in making pragmatic financial and risk-mitigation decisions. The book emphasizes the importance of flexibility and attempts to demonstrate that alternative credible approaches are helpful and required in understanding a great many phenomena.
Categories: Nature

Finance and Economics Discussion Series

Finance and Economics Discussion Series

... value at risk " ) , the difference between .02 and .01 can be large if the
distribution is assumed to have " fat tails . ... The models do not address the
statistical consequences of time aggregating asset returns needed to estimate
longer ...

Author:

Publisher:

ISBN: UCAL:C3676055

Category: Economics

Page:

View: 123

Categories: Economics

Handbook on the Economics of Climate Change

Handbook on the Economics of Climate Change

... and that the economic consequences of fat-tailed structural uncertainty (along with unsureness about hightemperature damages) can outweigh the effects ...

Author: Graciela Chichilnisky

Publisher: Edward Elgar Publishing

ISBN: 9780857939067

Category: Science

Page: 464

View: 891

This timely Handbook recognises the emergence of climate change as the defining topic of our time. With public climate discourse growing more urgent every year, this Handbook brings together international experts from different economic disciplines to answer critical climate policy questions.
Categories: Science

Fatigue Durability and Fracture Mechanics

Fatigue  Durability  and Fracture Mechanics

Fatigue failure is one such risk with 'fat tails'. The 'Worst-Case' scenario is considered during the Design phase for Design assurance, ...

Author: S. Seetharamu

Publisher: Springer Nature

ISBN: 9789811547799

Category: Coatings

Page: 645

View: 906

This book presents selected papers presented during Fatigue Durability India 2019. The contents of this volume discuss advances in the field of fatigue, durability, and fracture, and cover mechanical failure and its applications. The chapters cover a wide spectrum of topics, including design, engineering, testing and computational evaluation of the components or systems for fatigue, durability, and fracture mechanics. The contents of this book will appeal not only to academic researchers, but also to design engineers, failure analysts, maintenance engineers, certification personnel, and R&D professionals involved in a wide variety of industries.
Categories: Coatings

A Practical Guide to Heavy Tails

A Practical Guide to Heavy Tails

Statistical Techniques and Applications Robert Adler, Raya Feldman, Murad Taqqu. meaningful study of extreme risk in financial markets.

Author: Robert Adler

Publisher: Springer Science & Business Media

ISBN: 0817639519

Category: Mathematics

Page: 534

View: 485

This volume contains a unique collection of mathematical essays that resent a battery of techniques and approaches for the statistical analysis of heavy tailed distributions and processes. The articles cover a number of applications of heavy tailed modeling, running the gamut from insurance and finance, to telecommunications and the World Wide Web, and classical signal/noise detection problems.
Categories: Mathematics

Strategic Risk Management

Strategic Risk Management

This becomes particularly critical in fat-tailed domains where conventional statistical measures cease to have any practical meaning, but rather has the ...

Author: Torben Juul Andersen

Publisher: Routledge

ISBN: 9780429851568

Category: Business & Economics

Page: 112

View: 152

Organizations face challenges in adapting their current business and operational activities to dynamic contexts. Successful companies share a common characteristic of dealing with the emergent risks and threats in responses that generate viable solutions. Strategic risk management (SRM) is a multidisciplinary and rather fractured field of study, which creates significant challenges for research. This short-form book provides an expert overview of the topic, providing insight into the theory and practice. Essential reading for strategic management researchers, the authors frame the fundamental principles, emerging challenges and responses for the future, which will also provide valuable insights for adjacent business disciplines and beyond.
Categories: Business & Economics

Journal of the American Statistical Association

Journal of the American Statistical Association

Finally , the fourth reason they give against the stable distribution is that
alternative statistical mechanisms have been proposed that are ... as a very
useful modeling tool , which can deliver excellent risk forecasts , especially in
turbulent times and in conjunction with generalized ... Chapter 5 discusses
various fat - tailed and asymmetric distributions , which are better suited for
capturing the skewness and ...

Author: American Statistical Association

Publisher:

ISBN: UOM:39015085199381

Category: Statistics

Page:

View: 509

Categories: Statistics

Complex Materials in Physics and Biology

Complex Materials in Physics and Biology

The breakdown of Gaussian statistics appears as a fat tail in this ... The physical consequences of this fat tail and corresponding crossover in length ...

Author: F. Mallamace

Publisher: IOS Press

ISBN: 9781614990710

Category: Science

Page: 450

View: 617

The surprising connections which have developed between physics and various fields as diverse as biology and economics now constitute the fascinating research area known as complex materials and systems. The study of complex materials and processes is rapidly expanding, and many important experimental and theoretical discoveries have been made in recent years. Statistical physics is key to exploring this new and expanding field, enabling an understanding of real-world phenomena compromised of complex materials or exhibiting complex processes. This book includes lectures presented at the CLXXVI International School of Physics “Enrico Fermi”, held in Varenna, Italy, in July 2010. The school focused on recent advances and developing perspectives in the study of complex materials and processes, as related to physics and biology. The book provides both an introduction and a complete presentation of recent theoretical and experimental developments for each topic. Topics addressed include: scaling and universality, supra-molecular systems and solutions, polymer systems, static and dynamics of liquid water, arrested dynamics and jamming, dynamics of out of equilibrium systems, physics of confined liquids, granular matter, physics of biological and medical systems, networks in physical and social sciences, turbulence in physics, biology and economics and finally, switching phenomena in biology and economics. The book provides reviews of these cutting edge topics by leading authorities and will be a reference work useful to both advanced research professionals and beginning graduate students.
Categories: Science

Behavioral Finance for Private Banking

Behavioral Finance for Private Banking

A statistical consequence of prices being unpredictable is that returns are ... For example, they have fat tails (i.e., too many very bad returns)—which ...

Author: Kremena K. Bachmann

Publisher: John Wiley & Sons

ISBN: 9781119453710

Category: Business & Economics

Page: 256

View: 879

An essential framework for wealth management using behavioral finance Behavioral Finance for Private Banking provides a complete framework for wealth management tailored to the unique needs of each client. Merging behavioral finance with private banking, this framework helps you gain a greater understanding of your client’s wants, needs, and perspectives to streamline the decision making process. Beginning with the theoretical foundations of investment decision making and behavioral biases, the discussion delves into cultural differences in global business and asset allocation over the life cycle of the investment to help you construct a wealth management strategy catered to each individual’s needs. This new second edition has been updated to include coverage of fintech and neurofinance, an extension of behavioral finance that is beginning to gain traction in the private banking space. Working closely with clients entails deep interpersonal give and take. To be successful, private banking professionals must be as well-versed in behavioral psychology as they are in finance; this intersection is the heart of behavioral finance, and this book provides essential knowledge that can help you better serve your clients’ needs. Understand the internal dialogue at work when investment decisions are made Overcome the most common behavioral biases—and watch for your own Learn how fintech and neurofinance impact all aspects of private banking Set up a structured wealth management process that places the client’s needs front and center Private banking clients demand more than just financial expertise. They want an advisor who truly understands their needs, and can develop and execute the kind of strategy that will help them achieve their goals. Behavioral Finance for Private Banking provides a complete framework alongside insightful discussion to help you become the solution your clients seek.
Categories: Business & Economics

Integrated Catastrophe Risk Modeling

Integrated Catastrophe Risk Modeling

In the presence of fat tails, it is inappropriate to model the consequences using the normal or lognormal distributions, and techniques based on mean values ...

Author: Aniello Amendola

Publisher: Springer Science & Business Media

ISBN: 9789400722262

Category: Nature

Page: 290

View: 605

Efficient and equitable policies for managing disaster risks and adapting to global environmental change are critically dependent on development of robust options supported by integrated modeling. The book is based on research and state-of-the art models developed at IIASA (International Institute for Applied Systems Analysis) and within its cooperation network. It addresses the methodological complexities of assessing disaster risks, which call for stochastic simulation, optimization methods and economic modeling. Furthermore, it describes policy frameworks for integrated disaster risk management, including stakeholder participation facilitated by user-interactive decision-support tools. Applications and results are presented for a number of case studies at different problem scales and in different socio-economic contexts, and their implications for loss sharing policies and economic development are discussed. Among others, the book presents studies for insurance policies for earthquakes in the Tuscany region in Italy and flood risk in the Tisza river basin in Hungary. Further, it investigates the economic impact of natural disasters on development and possible financial coping strategies; and applications are shown for selected South Asian countries. The book is addressed both to researchers and to organizations involved with catastrophe risk management and risk mitigation policies.
Categories: Nature

Handbook of Climate Change Communication Vol 2

Handbook of Climate Change Communication  Vol  2

... to climate change impacts and the solutions for mitigation and adaptation)? (7) ... statisticalfat tails” involved in low probability and high impact ...

Author: Walter Leal Filho

Publisher: Springer

ISBN: 9783319700663

Category: Science

Page: 419

View: 199

This comprehensive handbook provides a unique overview of the theory, methodologies and best practices in climate change communication from around the world. It fosters the exchange of information, ideas and experience gained in the execution of successful projects and initiatives, and discusses novel methodological approaches aimed at promoting a better understanding of climate change adaptation. Addressing a gap in the literature on climate change communication and pursuing an integrated approach, the handbook documents and disseminates the wealth of experience currently available in this field. Volume 2 of the handbook provides a unique description of the theoretical basis and of some of the key facts and phenomena which help in achieving a better understanding of the basis of climate change communication, providing an essential basis for successful initiatives in this complex field.
Categories: Science

Handbook Of Heavy tailed Distributions In Asset Management And Risk Management

Handbook Of Heavy tailed Distributions In Asset Management And Risk Management

Statistical methods derived from it can be employed in finance. The tail decay has important implications for portfolio risk measurement and stress-testing, ...

Author: Stoyan V Stoyanov

Publisher: World Scientific

ISBN: 9789813276215

Category: Business & Economics

Page: 600

View: 427

The study of heavy-tailed distributions allows researchers to represent phenomena that occasionally exhibit very large deviations from the mean. The dynamics underlying these phenomena is an interesting theoretical subject, but the study of their statistical properties is in itself a very useful endeavor from the point of view of managing assets and controlling risk. In this book, the authors are primarily concerned with the statistical properties of heavy-tailed distributions and with the processes that exhibit jumps. A detailed overview with a Matlab implementation of heavy-tailed models applied in asset management and risk managements is presented. The book is not intended as a theoretical treatise on probability or statistics, but as a tool to understand the main concepts regarding heavy-tailed random variables and processes as applied to real-world applications in finance. Accordingly, the authors review approaches and methodologies whose realization will be useful for developing new methods for forecasting of financial variables where extreme events are not treated as anomalies, but as intrinsic parts of the economic process.
Categories: Business & Economics