Red-Blooded Risk: The Secret History of Wall Street

Payoff

What is the payoff for working through the four previous topics, as well as some more conventional risk management material? I will give you simple and logical answers to a variety of questions about risk. You'll have to decide for yourself whether the answers are true, but none of them will be airy generalities. I will not ask you to take anything on faith. The logic and evidence will be presented clearly, as will the historical development of the ideas. I believe everything in here is true, and I have tested it over many years of actual risk taking, plus observation of others. I cannot claim it is accepted widely, as it is not even known widely. But it does represent the consensus of successful modern quantitative risk takers in finance. It's how the global financial system works—and the global financial system is increasingly determining how everything works.

I have presented the material in this book over the years in articles and speeches, with mixed success. I find it easiest to communicate to professional risk takers who are good at mathematics. I hope this book will help broaden the audience to people who are not particularly fond of mathematics, and who take risk but do not focus their profession on risk. The group I have the hardest time with is risk avoiders who are good at mathematics. They seldom disagree with me and they claim to understand, but we talk at cross-purposes. I say “risk is good,” and they agree, thinking I mean that risk must be accepted in order ...