Flight Of The Black Swan

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taleb, philosophy, economics,

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Flight Of The Black Swan

  1. 1. COVER STORY By STEPHANIE BAKER-SAID Photograph by BRAD TRENT
  2. 2. Taleb’s literary success yielded a multimillion- dollar advance on the book he’s now writing. LES JORGENSEN 40 BLOOMBERG MARKETS MAY 2008
  3. 3. K JUN Source: Nassim Taleb 41 MAY 2008 BLOOMBERG MARKETS
  4. 4. Taleb dismisses the bell curve averages of mathematics pioneer Carl Friedrich Gauss. HULTON ARCHIVE/GETTY IMAGES 42 BLOOMBERG MARKETS MAY 2008
  5. 5. Hedge fund manager Mark Spitznagel says he and Taleb aim for ‘infrequent huge payouts.’ DAVID STRICK 44 BLOOMBERG MARKETS MAY 2008
  6. 6. Philosopher Karl Popper, a Taleb hero, said trying to prove a theory false is the best test. STEVE PYKE/GETTY IMAGES 46 BLOOMBERG MARKETS MAY 2008
  7. 7. Born in Lebanon, Taleb collects Orthodox Christian icons and sculpted Roman heads. BRAD TRENT 48 BLOOMBERG MARKETS MAY 2008
  8. 8. Stephanie Baker-Said is a senior writer at Bloomberg News in London. ssaid@bloomberg.net Tracking a Put Option At the end of 2007, you could have bought a put option on Apple function to chart the daily returns of Apple stock. For Inc. stock with a strike price of $120 for just 59 cents. Shares of the returns during the previous two years, type AAPL US iPhone maker traded at $198 on Dec. 31, and the prospects of a 40 <Equity> HRH <Go>, tab in to the RANGE fields, enter 01/03/06 and 12/31/07 and press <Go>. During that period, percent drop—at least judging by historical performance—were remote. (Put options grant the right but not the obligation to sell Apple stock never fell more than 7.4 percent in a day. To the underlying stock at a set price on or before expiration.) compare the distribution of returns early this year, tab in to the RANGE fields again, enter 01/03/08 and 03/07/08 and You can use the Historical Return Histogram (HRH) press <Go>. Apple’s drop of almost 11 percent on Jan. 23 falls outside the nor- mal distribution, as shown at left. You can use the Option Monitor (OMON) function to display price, volume and open interest data for Apple options. Type OMON <Go> and click on the Expiry button on the red tool bar to select an expiration month. To graph the $120 puts that expire in April, type QAA+PD US <Equity> GP <Go>. As of March 7, they traded at $6.60, an 11-fold gain. MARYANN BUSSO 50 BLOOMBERG MARKETS MAY 2008

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