Stalking the Black Swan: Research and Decision Making in a World of Extreme Volatility

November 30, 2020
Stalking the Black Swan: Research and Decision Making in a World of Extreme Volatility

Kenneth A. Posner spent close to two decades as a Wall Streetanalyst, tracking the so-called "specialty finance" sector, whichincluded controversial companies such as Countrywide, Fannie Mae,Freddie Mac, CIT, and MasterCardmany of which were caught in thesubprime mortgage and capital markets crisis of 2007. While extremevolatility is nothing new in finance, the recent downturn caughtmany off guard, indicating that the traditional approach todecision making had let them down. Introducing a new framework forhandling and evaluating extreme risk, Posner draws on years ofexperience to show how decision makers can best cope with the"Black Swans" of our time.Posner's shrewd assessment combines the classic fundamentalresearch approach of Benjamin Graham and David Dodd with morerecent developments in cognitive science, computational theory, andquantitative finance. He outlines a probabilistic approach todecision making that involves forecasting across a range ofscenarios, and he explains how to balance confidence, reactaccurately to fast-breaking information, overcome informationoverload, zero in on the critical issues, penetrate the informationasymmetry shielding corporate executives, and integrate the powerof human intuition with sophisticated analytics. Emphasizing thecomputational resources we already have at our disposalourcomputers and our mindsPosner offers a new track to decision makingfor analysts, investors, traders, corporate executives, riskmanagers, regulators, policymakers, journalists, and anyone whofaces a world of extreme volatility.