Customer Reviews

Fat-Tailed and Skewed Asset Return Distributions : Implications for Risk Management, Portfolio Selection, and Option Pricing

5 star:		(2)
4 star:		(0)
3 star:		(1)
2 star:		(1)
1 star:		(3)

 

 

I unfortunately learned too late that the negative review of Jukka Taskinen was understatement.

The "book" is a series of shallow, disjointed chapters that just touch on the important topics. It superficially skims a wide range of issues so that the reader can be a term-dropping jack-of-all-trades but master of none.

I was partially lulled by its availability as a .pdf, which is convenient, and its title and purported thesis of heavy-tailed modeling, which really is a very important thesis but is just a red herring here: the book provides very superficial treatment of this concept throughout, without really building a solid methodological case for it (even though its true, which is why its clever and deceptive marketing, rather than a scholarly OR useful practitioner work). It provides no new insight generally, and the only new insight to me was that I am beginning to see what passes as a typical of Fabozzi publication. I'm angry I wasted the $$.

I purchased this book because I was told that it "treated" important topics in the statistical analysis of fat-tailed distributions of price movements--namely, copulas, modeling of VaR under non-normal stable distributions, etc. Unfortunately, these topics are given little substantive coverage. The book is basically a long survey article with little practical instruction for HOW to deal with fat-tailed distributions. The one strong point of the book is the extensive list of references. Mainly though, the book suffers from the general sense of "math anxiety" that is so prevalent throughout the population. Bottom line, if you don't know enough math to deal with the technicalities that the authors so studiously avoid, you can't do anything useful with the modeling of fat-tailed distributions. Consequently, I cannot think of any audience for whom this book would be useful, other than someone wishing to do a literature search of the substantive work in this area.

To all 1* reviewers, moaning about this being a "superficial" book - READ THE BACK PAGE, quote "...they offer you a LESS TECHNICAL look at how portfolio selection, risk management & option pricing modeling should and can be undertaken..."

Now, READ THE PREFACE: page xii "We must admit our intent at the outset was to provide a NON-TECHNICAL treatment of the topic."

If you can't understand who this book is intended for, are you qualified to write a review? To dismiss this as a book for "name droppers" reflects an arrogant misunderstanding. Everyone has to start somewhere on the learning curve.

In terms of its stated aim, this book does an excellent job. There are hundreds of thousands of investment "professionals" who have never heard of stable Paretian distributions or copulas, who would benefit from education. And, yes it is printed on cheap paper. But that makes it very light & easy to carry round! Is it overpriced? Of course - nothing new there. But savvy buyers don't pay full price anyway.

again a typical Fabozzi publication, which is printed on cheap paper although the hefty price would have allowed for a use of higher quality paper.
But most of all, this book does not explain in required detail the distributions nor generating functions. This is for someone who wants to learn some term-dropping without profound insight.

RECOMMENDATION: TO LEARN, BUT ANOTHER BOOK. FABOZZI PUBLICATIONS ARE ALWAYS THE SAME, SUPERFLUOUS AND EXPENSIVE.

As a reader of Rachev and co's earlier work 'Stable Paretian Models in Finance' this work is admittedly about halfway down from the mathematical stratosphere where the former floated. If anyone knows of a work which can clearly and convincingly explain the implications of this work for the mug punter please let me know at jenpalex@actapple.org.au.

Paul Mason

The book provides a very elegant introduction to heavy tails and skewness, and their implications for risk management, portfolio selection, and option pricing. The "theoretical part" of the book is a gem in the way it eases the reader into (advanced) quantitative concepts such as copulas, stable distribution, risk measures, time-series models, etc. There are many other texts out there that provide thorough technical desciptions of the above-mentioned concepts. However, rarely a book has presented them so effortlessly and with so much intuition. A reader interested in contemporary issues in empirical finance will surely find this book very useful.

One can read the ToC and the first chapter (introduction) with Amazon's "look inside" feature/service. I think this lets one make good estimate of the book's level and depth of coverage, and to decide if the book meets one's needs.