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Iceberg Risk: An Adventure in Portfolio Theory Hardcover – December 12, 2002

4 out of 5 stars 5 customer reviews

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Editorial Reviews

Review

". . . focuses on defining, measuring and analyzing portfolio risk . . . insightful and tractable process of incorporating iceberg risk into standard portfolio theory." -- Dr. Jane Hobson, CFA, Vice President Educational Products, Association for Investment Management and Research

"A rare and sincere investigation looking beyond the crust and into the guts of financial risk." -- Nassim Nicholas Taleb, author of Fooled by Randomness and Dynamic Healing

"From the point of investment industry practitioner and risk management professional . . . nothing short of groundbreaking . . . must read for investment professionals." -- Carlos Asilis, Chief U.S. Equity Strategist, J.P. Morgan Chase & Co.

"If you rely on the comfort blanket of the Central Limit Theorem, prepare to be first horrified and then enlightened." -- Paul Wilmott, author of Derivatives and Paul Wilmott on Quantitative Finance

About the Author

Kent Osban is a US citizen living in London. He holds a PhD in economics from University of California at Berkeley and has worked for the International Moneary Fund and the World Bank in Washington DC and for Goldman Sachs and Credit Suisse First Boston in London. He speaks fluent Russian. He is currently working as a consultant to Trilogy Advisors LLC, a NY based investment advisory firm, where he manages to hedge fund and is implementing and utilising his theories on iceberg risk.
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Product Details

  • Hardcover: 382 pages
  • Publisher: Texere; 1 edition (December 12, 2002)
  • Language: English
  • ISBN-10: 1587990687
  • ISBN-13: 978-1587990687
  • Product Dimensions: 8.9 x 7.4 x 1.3 inches
  • Shipping Weight: 1.6 pounds
  • Average Customer Review: 4.0 out of 5 stars  See all reviews (5 customer reviews)
  • Amazon Best Sellers Rank: #1,297,010 in Books (See Top 100 in Books)

Customer Reviews

Top Customer Reviews

By Craig W. French on April 30, 2003
Format: Hardcover
"Ignorance is Blight"... Devlin Advogado's scrawled message across his desk left me with an unsettled feeling, similar to the one I had a long time ago while reading Robert Pirsig's 'Zen and the Art of Motorcycle Maintenance'. Perhaps academic research will someday quote from Kent Osband's 'Iceberg Risk' (New York: Texere, 2002), much as Richard Roll, in his famous 1977 Critique of tests of the CAPM, quoted from Pirsig. Osband endeavors to help us avoid blight in this enlightening and entertaining story as we follow supersharp risk analyst Devlin and his pragmatic manager, Conway Wisdon, on a wild ride through the world of investment banking risk management.
But Iceberg Risk is more than a novel; indeed, it is really two books in one: each chapter covers the intuition of its subtopic first, through the clever device of Devlin and Conway's saga within Megabucks Investment Bank; and then delves more directly into the mathematics. Of the math, the reader is encouraged to explore "about as much or as little as you want", a feature I especially appreciated given my low-calorie mathematical diet. And, just as the novel part is an entertaining read, the quantitative part is a useful summary of the mechanics of portfolio management theory.
Part I of Iceberg Risk covers the statistics of probability, covariance and correlation, Pascal's triangles and Bernoulli variables, IID versus non-IID estimates of tail risk, Tchebyshev's inequality, the Kuhn-Tucker conditions for the solution to a Lagrangean optimization, mixtures of discrete and continuous probability measures, De Finetti's theorem, the problems with VaR and the ubiquitous (in finance) normality assumption, and even computer sex (read the book!).
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Format: Hardcover
Iceberg risk describes in clear terms the financial risk that is missed by standard techniques. It is essential reading for anyone in financial risk management, as well as anyone interested in the quantitative reason for extreme financial events. It is an entertaining novel that gives a realistic picture of how risk management works in real institutions, a rigorous and original work of mathematics and a solid textbook that builds results step-by-step from basic algebra. This triple nature makes the book suitable for everyone from mathphobes to serious quants.
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Format: Hardcover
I really enjoyed this book. I don't believe that my review can add much value on top of the other reviews, but maybe I can entice a few of you to buy it.
I have read the book twice now, which I think is required (at minimum) to really absorb everything. I see that Aaron's review got 2 out of 5, and I am a bit perplexed, because his is succinct and accurate. Oh well, you can't win 'um all. One pro is that the book is written in an entertaining way. Half the chapters are a story with a lesson, and the other half is math. Together they read like some popular books that are out now, like Havil's "Gamma", or "Euler" by Dunham: it reads like a book, but with equations everywhere. It is the half way point between a publication and a novel. If you are a masters in finance or an MBA, with no real math background, this might be distracting and halting, but to a quant it should cut like butter.
My only complaint, and this might not be a complaint but, rather, an aversion to suspense, is that there are certain thoughts that aren't completed. As interesting as the read is, I feel like it is almost a cliffhanger; baiting for books to come? I don't think this was deliberate. Some thoughts, while they began with fireworks, just petered out.
Also, it is a bit expensive but, hey, most of us aren't paying for this and, at a minimum, writing it off ;-) (Sorry to any students out there, I owe you a drink)
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Format: Hardcover Verified Purchase
Just finishing this now, the running narrative is a welcome distraction from the material, which is hit and miss. The second half (more proscriptive) is better in general than the first, which is a pretty tortuous journey though non-Gaussian probability. It is a strange book, the math makes it unapproachable to the layperson, but the colloquial prose makes it a bit tedious as a technical read. Still, there are some good parts, enough that I will likely hang on to it for a while in case I need to refer to them.
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Format: Hardcover
I'm having some trouble getting through some of the proofs. I studied Chemical Engineering and Finance. If you can accept things this book is good. If you are the kind of person that needs to prove everything it will take a long time to read.
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