"Finally, a book taking a critical look at quantitative finance models, illuminating both their flawed fantasy assumptions as well as the uncritical use of such models on Wall Street, in many cases, leading to billion dollar losses. Pablo Triana knows both the financial industry and the academic community from the inside. A must–read for anyone interested in finance."
—Dr. Espen Gaarder Haug, trader, thinker, and author of Derivatives Models on Models
"A thoroughly readable explanation of the problems that have beset the models and quantitative techniques that have underpinned so much of finance in recent years. If only the bankers had heeded this message a few years before, we might not be in such a big mess today."
—Gillian Tett, Assistant Editor of the Financial Times, overseeing global financial markets coverage, and author of Fool′s Gold
"Pablo Triana dismembers quantitative finance, in theory and in practice, with expertise, anger,and an excellent eye for the illuminating anecdote. By the time he has finished marshalling his evidence, his call to replace complex equations with something more like common sense sounds like, well, common sense."
—Edward Hadas, Assistant Editor at Breakingviews.com; and author of Human Goods, Economic Evils: A Moral Approach to the Dismal Science
"Pablo Triana is an entertaining and engaging writer, even on the dry subject of finance theory. His debunking of conventional wisdom is a treat."
—Pauline Skypala, Editor, FTfm, Financial Times
"Triana′s book is an unrelenting fusillade of detailed and irrefutable arguments against financial theorems and those who teach them. It should, by rights, spark a revolution in both investment banks and business schools. But, at the very least, it is required reading for anyone who would regulate the finance industry."
—Felix Salmon, Finance Blogger, Reuters
Preface: An Evening at NYU, Taleb′s Article, and a Credit Crisis.
Mathew Gladstein′s Complaisanc.
CHAPTER 1 PLAYING GOD.
It′s tough to model human action.
Finance is not as religious as physics.
Black Swans make things harder.
The markets are not Normal and the past is a faulty guide.
Should we care that theorists persist?
CHAPTER 2 THE FINANCIAL ECONOMICS FIEFDOM.
When describing reality was okay.
It′s the incentives, stupid.
Many obstacles to reform.
Heeding Fischer Black′s message.
CHAPTER 3 QUANT INVASION.
Machine learning comes to finance.
It′s a computational thing.
Models live here, too.
Interesting enough for a movie.
CHAPTER 4 COPULATED NIGHTMARES.
Abrupt reform, if not so much prison.
The 2005 pre–warning.
Rating us into hell.
A disapproving grin.
CHAPTER 5 BLAH VaR BLAH.
Tracking a true culprit.
A long rap sheet of evidence.
The police are in on it.
CHAPTER 6 BLUE IS NOT GREEN.
Lehman did die.
Anything is possible.
Buffett versus the Black Swan.
Stubbornly holding the theoretical fort.
An end to indoctrination.
CHAPTER 7 THE BLACK–SCHOLES CONUNDRUM.
Once upon a time at MIT.
Frowning, not smiling.
How Black was that Monday.
A devastating KO.
The Taleb & Haug critique.
CHAPTER 8 BLACK SWAN DECEIT?
The tired “perfect storm” alibi may be a facade.
Indoctrinating clients and investors.
The unseemly marketers of academic dogma.
Do as I say, not as I do.
CHAPTER 9 AN UNHEALTHY YEARNING FOR PRECISION.
Dangerous voluntary enslavement.
Let freedom ring.
Normality can kill you.
A VIXing issue.
Protect those derivatives.
CHAPTER 10 WE NEED FAT TONY.
FINALE SHOULD THE NOBEL PRIZE IN ECONOMICS BE ELIMINATED?
About the Author.
—Risk Management Magazine
"Readers of this book may make quite a lot of noise. . . Some will cheer out loud; others will yelp as cherished beliefs are torn into. At times, the book is deliberately incendiary. Triana is trying to stimulate debate. . . On the whole, this is a good read."
—The Financial Times, July 23rd 2009
"...calls for a return to "good old fashioned commonsense decision making"."
—Daily Express, June 4th 2009
"This book explains how it is that theoretical finance can fail dramatically in the real world."
—Finanace & Management Faculty, June 2009
"The book is fizzing with ideas"
—The Economist, June 29th 2009
" Triana’s book will ruffle a lot of feathers, but it also will make many readers think hard."
"A deeply unsettling insider account of how bogus mathematics overtook finance and was a key contributor to the financial collapse of 2008–2009 . . . With deep insight, Triana deconstructs the "pillars" of mathematical finance . . . Like Nassim Taleb, celebrated author of The Black Swan (2007), Triana is calling for major surgical reform of such business schools′ curricula. An important addition to our deeper understanding of how finance must be reformed."
—Hazel Henderson, Ethical Markets
"Should the Nobel Prize for economics be abolished? That is one of the suggestions in Pablo Triana′s provocative book "Lecturing Birds on Flying: Can Mathematical Theories Destroy the Markets?" . . . As Nassim Nicholas Taleb writes in his witty introduction to the book, giving someone the wrong map is worse than giving them no map at all. . . a good read. Some may find the elaborate prose closer to Cervantes than to, say, Nobel Prize winner Robert Merton –– annoying. But perhaps Cervantes is the right writer to emulate when tilting at windmills. "
"The highlight of Triana′s book is his valuable insights into the problems with mathematical economic models, which make his argument quite forceful."