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Unperturbed By Volatility: A Practitioner's Guide To Risk
Central to all investment allocation and risk management is being clear on what risks one is being compensated for in the reward delivered. In an era of increasingly interlaced markets, assessing this correctly is paramount, but often used measures such as volatility can in practice be inadequate and misleading without other serious and often more important considerations.
Unperturbed by Volatility takes a deep look at the essential features of real-world financial markets, analyzing the strengths and the limitations of various metrics, techniques and methods, where these can be tweaked to work, where metrics such as volatility break down, and where in practice we must seek constructions that make such errors manageable.
Primary themes also include the limits of data, and the role of market extremes - both up and down and in both risk and opportunity. Relevant issues are diagnosed within a consistent framework that forces market realities to the fore and from which useful conclusions can be drawn. All available market instruments are put to full use.
Unperturbed by Volatility is built on strong theoretical grounds and practical insights. Drawing on applicable elements from diverse quantitative disciplines, from probability theory to statistical tools to quantitative finance and others, the book requires some prior knowledge but its delivery is not heavily mathematical. The simple, robust and useful is given preference over the technically fancy.
Unperturbed by Volatility takes a deep look at the essential features of real-world financial markets, analyzing the strengths and the limitations of various metrics, techniques and methods, where these can be tweaked to work, where metrics such as volatility break down, and where in practice we must seek constructions that make such errors manageable.
Primary themes also include the limits of data, and the role of market extremes - both up and down and in both risk and opportunity. Relevant issues are diagnosed within a consistent framework that forces market realities to the fore and from which useful conclusions can be drawn. All available market instruments are put to full use.
Unperturbed by Volatility is built on strong theoretical grounds and practical insights. Drawing on applicable elements from diverse quantitative disciplines, from probability theory to statistical tools to quantitative finance and others, the book requires some prior knowledge but its delivery is not heavily mathematical. The simple, robust and useful is given preference over the technically fancy.
- GenresFinance
371 pages, Paperback
Published January 21, 2019
7 people are currently reading
78 people want to read
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April 14, 2024
Unperturbed by Volatility has quite a different flavour to other textbooks on options trading and volatility. Indeed, it advertises itself as a book on risk rather than a book on options – volatility and financial derivatives are discussed in the context of risk, but so are other topics.
For instance, I was previously quite unfamiliar with the statistics of fat tails (and somewhat unwilling to read Taleb’s Statistical Consequences of Fat Tails), so it was a relief to have the first two chapters of Unperturbed focussing heavily on the practicalities of modelling asset returns with fat-tailed distributions.
While the book is occasionally heavy-going with theory, this is nicely balanced by practicality, in the form of simulation-based experiments and studies on market data. A good example is their simulations on the convergence of the mean absolute deviation as an estimator for sample standard deviation. Surprisingly, under fat tails the MAD outperforms the sample stdev as an estimator for volatility.
On the volatility/options front, Unperturbed covers substantially the same topics you would find in other similar resources, like Sinclair’s Volatility Trading and Bennett’s Trading Volatility (both of which I think are slightly clearer).
Unperturbed is not suitable for a beginner and it could do with some editing – the writing is a little disorganised and I found numerous typos (at least in the version I’m reading). But where it shines is in the integration of various concepts that are deeply related to volatility – the statistics of fat tails, portfolio construction, tail risk hedging – which other similar books generally do not address. There’s gold in these hills!
For instance, I was previously quite unfamiliar with the statistics of fat tails (and somewhat unwilling to read Taleb’s Statistical Consequences of Fat Tails), so it was a relief to have the first two chapters of Unperturbed focussing heavily on the practicalities of modelling asset returns with fat-tailed distributions.
While the book is occasionally heavy-going with theory, this is nicely balanced by practicality, in the form of simulation-based experiments and studies on market data. A good example is their simulations on the convergence of the mean absolute deviation as an estimator for sample standard deviation. Surprisingly, under fat tails the MAD outperforms the sample stdev as an estimator for volatility.
On the volatility/options front, Unperturbed covers substantially the same topics you would find in other similar resources, like Sinclair’s Volatility Trading and Bennett’s Trading Volatility (both of which I think are slightly clearer).
Unperturbed is not suitable for a beginner and it could do with some editing – the writing is a little disorganised and I found numerous typos (at least in the version I’m reading). But where it shines is in the integration of various concepts that are deeply related to volatility – the statistics of fat tails, portfolio construction, tail risk hedging – which other similar books generally do not address. There’s gold in these hills!
Displaying 1 of 1 review