Monday, April 16, 2007

Quantifying the tails - Another interesting book

One of my readers Rusen pointed to another very interesting (if somewhat specialized) book which deals with quantifying extreme or once-in-a-hundred-years events. The name of this book is "Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets" by Nassim Nicholas Taleb.

Taleb talks about events that occur at the extreme end of a probability distribution, where we think our models work but they models break down (because of a number of reasons). Taleb presents a perspective around where we should depend on models and where our intuition should tell us not to trust the models.

If readers want a preview of what's there in the book, check out this website (Taleb is releasing a second book this month called "The Black Swan: the impact of the highly improbable".)

Thursday, April 12, 2007

Some interesting books on risk and probability

My holiday reading in India is two books I have been planning to read for a while now, but never really found the time.

One is "Against the Gods: The Remarkable Story of Risk" by Peter Bernstein. People who have read Peter Bernstein will know what to expect. Very detailed coverage of fairly arcane concepts without getting into too many technicalities. A good jumping board to get into the actual academic papers. (Something I love doing is to pick these books and then search for the bibliography, esp. academic papers. Very interesting exercise and highly encouraged for those amongst us who want to know a little more.). I should post a review of the book in the next few weeks. For those who want to read another quality book from Peter Bernstein, try "Capital Ideas".

Second is a book called "Chances are: Adventures in Probability" by Kaplan and Kaplan. I am midway through this book. Again very informative and entertaining. The underpinnings of insurance is particularly interesting. (Bayes is coming up in the next chapter. I am super excited!)

A third book I really enjoyed was "When Genius Failed" by Roger Lowenstein. Hope to start a discussion about the book very soon, as I see very immediate application with what LTCM went through and my current line of work. (No, I don't work with a hedge fund.)

Even while I am adding stuff about these books, do try and grab them from the local library or better still, own them. They will give make for pleasurable reading for many many years, I promise. For those living in Fairfax County in Virginia, USA, the library system has all of these books.

Thursday, April 5, 2007


If you have come to the Statistics Exchange, I am guessing you are someone facinated by Statistics and intrigued by the idea of what an exchange means.

This blog is just coming up but let me give you a preview of what you can expect. This is a place where people can get together and share statistical insights and ideas purely from a practitioner standpoint. Don't expect to see too much of theory here, this space is purely about interesting applications within the space. I am just getting started here and in the middle of a vacation, which is a perfect time to step back and do something like this. My regular job is full of statistical modeling, so it will be exciting to learn things from work and apply them here. And vice versa. Hoping to put some interesting stuff here pretty soon.