Perspectives - Black Monday and Black Swans
Posted: 18 May 2008
Investors need to be aware that rare events with an extreme impact that, afterwards, we think we could have predicted - in short, black swans - happen in the markets. Those who are trying to measure risk in the financial markets need to carefully distinguish risk, with its probabilities, from uncertainty, which cannot be measured. We have become increasingly vulnerable to black swans because our financial economy has come to play an ever-larger role in our productive economy.
Keywords: Financial Markets, Other, Investment Industry, Future Directions and Sources of Change, Risk Measurement and Management, Other
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