Tag Archives: fat tails

Modelling leverage and the financial crisis

Science reports on agent based models of financial leverage -Leverage: The Root of All Financial Turmoil: Given that in the buildup to the recent global economic meltdown hedge funds had been leveraging their deals by ratios of 30-to-1 (that is, … Continue reading

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Economist on fat tails and finance

A special report on the future of finance in The Economist Fallible mathematical models: In Plato’s cave: … although the normal distribution closely matches the real world in the middle of the curve, where most of the gains or losses … Continue reading

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How to deal with uncertainty in climate change economics

From the economist Martin L. Weitzman‘s website, a new draft paper On Modeling and Interpreting the Economics of Catastrophic Climate Change(pdf).  He proposes a method for including unlikely but extreme events (fat tails) in cost-benefit analyses, such as the uncertainty … Continue reading

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