Book description
Reshape your investing strategy for an increasingly uncertain world
“An engrossing, fast-paced, terrific read for anyone interested in the financial imbalances due to too much reliance on math and too little respect for indeterminacy.”
—Tyler Durden, ZeroHedge.com
The world does not unfold according to a fixed set of rules. It is a dynamical system whose evolution looks like a bell curve with fat “tails.” The same is true of financial markets. However, every day we rely on the certainty and precision of mathematical strategies that assume the contrary to control and grow wealth in markets.
Tail Risk Killers shows you how the rigidity of model-based thinking has led to the fragility of today’s global financial marketplace, and it explains how to use adaptive trading strategies to mitigate risk in impending market conditions.
Risk management veteran Jeff McGinn pokes holes in prevalent assumptions about how financial markets act that tend to underestimate the likelihood of occurrence of extreme events. Through clear, conversational writing, real-world anecdotes, and easy-tofollow formulas, he provides a glimpse into the way tomorrow’s successful traders are viewing financial markets—with an eye for probability distributions. While illustrating how to protect your assets from tail risk, he shows you how to:
- Implement the six axioms for risk management
- Prepare for the unintended consequences of central banks suppressing tail risk
- Identify and avoid the dark risks hidden in today’s derivative-laden financial system
- Anticipate the fate of credit default swaps that may not face extinction
McGinn argues that the intervention of central banks has robbed global markets of their opportunities to adapt, but this highly relevant book shows you that it is not too late to adapt your portfolio to survive the extreme events that happen more often than popular financial models suggest.
Tail Risk Killers helps you discover useful information and processes beyond the focus of industry standards, helps you connect the dots of evolving trading strategies and time your next trade for maximum profitability.
Table of contents
- Cover Page
- Tail Risk Killers
- Copyright Page
- Contents
- Acknowledgments
- Foreword
- Introduction
- CHAPTER 1 Default-Cost Asymmetry: Humpty Dumpty Was Pushed
- CHAPTER 2 Risk-Minimal Trade Construction: Treasuries Since 1798 and Gold
- CHAPTER 3 Par Value during the Black Plague: Treasuries Are Financial Teflon
- CHAPTER 4 Stretch to Farthest Point Known: Thoughts on a Hyperinflation Event
- CHAPTER 5 The Macreconomics of Decontrol: Multisigma Sovereign Risk
- CHAPTER 6 Weightless Waiting for the Deflation Descent
- CHAPTER 7 Disintegration and Securitization
- CHAPTER 8 Coming to Grips with Austerity
- CHAPTER 9 Carry Trade II: Extremely Long Dollar Love
- CHAPTER 10 Japanification: Some Asset Behaviors When the Government Is at War with the Natural Order of the Universe
- CHAPTER 11 The Narrow Road to the Deep North: Fixed-Income Skew and Signatures of Japanification
- CHAPTER 12 The Price of Stability Is Pathology: Thoughts on Some Default Intervals
- CHAPTER 13 Product over Process: Balance Complexity with Liquidity
- CHAPTER 14 High Yield and Market Makers
- CHAPTER 15 Thinking Outside the Bubble: A Pairs Trade on the EU Experiment
- CHAPTER 16 Dropping Acid in Disneyland: Thoughts on the New Normal
- CHAPTER 17 Synthetic Fixed Income and Rates—A Repo Puzzle: What Happened in July–August 2007?
- CHAPTER 18 Haircuts at the Core of Capitalism
- CHAPTER 19 Some Rules of the Road for Risk Management: The First Three Axioms
- CHAPTER 20 Some Rules of the Road for Risk Management: Axiom 4
- CHAPTER 21 Some Rules of the Road for Risk Management: Axiom 5
- CHAPTER 22 Some Rules of the Road for Risk Management: Axiom 6
- CHAPTER 23 The Fed Is a Two-Faced Mutant Pig
- CHAPTER 24 What Lurks Behind Your Trading Station
- CHAPTER 25 The Limits of (Statistical) Independence
- CHAPTER 26 Risk and Regulation
- CHAPTER 27 The Bond-CDS Basis and a Fixed-Income Conjecture
- CHAPTER 28 Fear Is Where the Power Is: The Politics of Credit-Default Swaps
- CHAPTER 29 Are Swaps “Natural”?: Market Structure and Vietnamese Sandwiches
- CHAPTER 30 Twilight of the Models
- CHAPTER 31 Emerging Market Sovereign Credit Derivatives and Equity Markets
- CHAPTER 32 The Information Content of a Negative Swap Spread: Hedge Funds Turn Down Free Money
- CHAPTER 33 For Those about to Swap (We Salute You)
- CHAPTER 34 Notional Interest-Rate Swaps, Credit-Default Swaps, and Printing Press Irrelevance
- CHAPTER 35 The Structure of Future Finance: Lessons from a Mathematical Landscape
- CHAPTER 36 The Reasonable Ineffectiveness of Mathematics in Trading
- CHAPTER 37 A Characterization of Dark Risk
- CHAPTER 38 Stop Chasing Tails: Some Long-Only Opening Lines in Portfolio Theory
- CHAPTER 39 Financial System Resonance and Complexity
- CHAPTER 40 Robots and Reptiles
- CONCLUSION
- Notes
- Index
Product information
- Title: Tail Risk Killers: How Math, Indeterminacy, and Hubris Distort Markets
- Author(s):
- Release date: January 2012
- Publisher(s): McGraw-Hill
- ISBN: 9780071784917
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