Black Swan Distribution

Just like to add the link to the Euler notebook containing the computations around the „Black Swan“ distribution, which should really be named Pareto type distribution, or maybe Cauchy distribution.

Click here!

6 Gedanken zu „Black Swan Distribution

  1. Canadian Money

    Hi Rene,

    I was wondering if you or anyone you are aware of has calculated the probability for a Black Swan stock market event? If so, I would also be interested in knowing how a trial was defined and how the event was defined for any such probability.


  2. Canadian Money

    Thanks for posting your work on the DAX. Interesting.

    I am currently „working my way“ through Taleb’s Black Swan book. I had read Fooled by Randomness some time ago. The bottom line appears to come down to Taleb agreeing with Frechet’s fat-tailed model.

    I liked Taleb’s definition of „random“…’anything that we don’t know how to predict‘. (my words not his)

    Taleb allows for the possibility that there may be a way to predict an event, but from a practical point of view, the event is effectively random for anyone who does not know how to predict it.

    This seems similar to your conclusion.


  3. mga010 Beitragsautor

    Thanks for the hint to Frechet fat tail. I am not a specialist in distributions.

    From my point of view, he looks at the tail (the black swans) as the interesting part of a distribution, and the more important one. I am currently trying to explain his power law. Is there any real life process producing it?

  4. Canadian Money

    I am currently reading an excellent book by Mandelbrot. I could not believe there was a copy in our small town local library. Its called „The (MIS) Behavior of Markets“. I find it to be a much easier to follow book than „The Black Swan“.

    It is a more straight-forward, simple language approach to the entire subject. For example, Mandelbrot uses the terms mild, medium and wild probability with wild being the Black Swan type rare events. One does not have to start memorizing new language for common place things.

    There is also lot of explaination about the power law. Still don’t understand that myself.

    Mandelbrot recognizes that the market has a memory and that it is not just a random walk. Something that I also concluded my own. He can put the math to it. I can’t.

    I’m only about half way through Mandelbrot’s book but I highly recommend it to anyone interested in market related probabilities.


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