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Lecturing Birds on Flying: Can Mathematical Theories Destroy the Financial Markets? Hardcover – June 9, 2009
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—Risk Management Magazine
"Readers of this book may make quite a lot of noise. . . Some will cheer out loud; others will yelp as cherished beliefs are torn into. At times, the book is deliberately incendiary. Triana is trying to stimulate debate. . . On the whole, this is a good read."
—The Financial Times, July 23rd 2009
"...calls for a return to "good old fashioned commonsense decision making"."
—Daily Express, June 4th 2009
"This book explains how it is that theoretical finance can fail dramatically in the real world."
—Finanace & Management Faculty, June 2009
"The book is fizzing with ideas"
—The Economist, June 29th 2009
" Triana’s book will ruffle a lot of feathers, but it also will make many readers think hard."
"A deeply unsettling insider account of how bogus mathematics overtook finance and was a key contributor to the financial collapse of 2008-2009 . . . With deep insight, Triana deconstructs the "pillars" of mathematical finance . . . Like Nassim Taleb, celebrated author of The Black Swan (2007), Triana is calling for major surgical reform of such business schools' curricula. An important addition to our deeper understanding of how finance must be reformed."
—Hazel Henderson, Ethical Markets
"Should the Nobel Prize for economics be abolished? That is one of the suggestions in Pablo Triana's provocative book "Lecturing Birds on Flying: Can Mathematical Theories Destroy the Markets?" . . . As Nassim Nicholas Taleb writes in his witty introduction to the book, giving someone the wrong map is worse than giving them no map at all. . . a good read. Some may find the elaborate prose closer to Cervantes than to, say, Nobel Prize winner Robert Merton -- annoying. But perhaps Cervantes is the right writer to emulate when tilting at windmills. "
"The highlight of Triana's book is his valuable insights into the problems with mathematical economic models, which make his argument quite forceful."
From the Inside Flap
Triana first analyzes the fundamental question of whether financial markets can in principle really be solved mathematically. He shows that the markets indeed cannot be tamed with equations, presenting a long and powerful list of obstacles to prove his point: maverick unlawful human actions rule the markets, unexpected and unimaginable events shape the markets, and historical data is not necessarily a trustworthy guide to the future of the markets. The author then examines the sources of origin of many prevalent theories and mathematical dictums. He details how the field of financial economics evolved from a descriptive discipline to an abstract one dedicated to technically concocting professors' own versions of how such a world should work. He goes on to explain how Wall Street and other financial centers became eager employers of scientists, and how scientists became eager employees of financial firms. Triana concludes with an in-depth discussion of the most significant historical episodes of theory-caused real-life market malaise, with a strong emphasis on the current credit crisis.
In the end, Lecturing Birds on Flying calls for the radical substitution of good old-fashioned common sense in place of mathematical decision-making and the restoration to financial power of those who are completely unchained to the iron ball of classroom-obtained qualifications.
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Top Customer Reviews
I was expecting more of the same from Triana, but with perhaps a slightly different viewpoint and possibly more details. What I got was a 350 page polemic from a confirmed math phobe and a slavish paen to Taleb. OK, Black-Scholes is not a great idea and VAR greatly underestimates market risk, but to repeat this theme again and again borders on the lunatic.
But that's not all, here's a quote from p. 203 that sums up the style of writing; he's referring (endlessly) to Black-Scholes-Merton and, in this case, to the S&P 500 volatility surface: "...Obviously, horizontal is not the same as curved. A curved line is a complete violation of BSM. Horizontal is not the same as curved. The end results are not BSM-compliant any more. It's not BSM. Curved is not horizontal. It's something else. BSM endorses horizontality. BSM negates curvedness. It can't be BSM. Curved is not horizontal". I kid you not.
The message of the book, delivered amply in Taleb's foreword and elsewhere, is that too often in the past econometric models put foward by the likes of Merton, Scholes and others have been blindly followed by market makers and regulators, with resultant disastrous effects. Unfortunately, Triana adds little additional insight and commits the greatest of all faults an author can make--to bore the reader.
"It is not fanatically expected that those pros who bring advanced analytics into the fold of practice would believe that the adopted models have a high chance of igniting trouble down the road. Rather, they would be assumed to be hopeful about the possible gains to be obtained by pledging allegiance to the math, whether in the shape of better prices, improved hedges, or more accurate risk measurements (the exception here would be those situations where financiers are forced by regulators to embrace a particular quantitative construct, the foundations of which they agitatedly distrust and which side effects they massively fear)."
"Quants do not build models to cause trouble. They hope models improve pricing, hedging and risk management. Sometimes bad models are imposed by regulators."
I understand most readers will not go through the trouble of decoding the prose.Read more ›
The book is way too repetitive!
-Imagine going for >74 pages (that's the longest chapter, #7) of repetition. Not only is he repeating lines from other chapters, no.... at times from the the same paragraph!
The writing style is rather weird.
- At some point he mentions Victor Niederhoffer by name and then at another chapter, he talks about the same story but this time it's no longer Victor but rather a "famous speculator"
- Again, he mentions Emanuel Derman by name and then in another chapter, he talks about the same story but this time, it's not longer Emanuel but it's now a "...famous quant/academic..."!
- I coud go on....
His understanding of the subject is not in question, at least not by me!
His opinions on VaR, BSM.
His opinions on the need for change, especially the financial economics professors' influence in the real world of finance
The relating of his work experience is another positive
All in all, I'd rather pass on the book, for I can assure anyone that the repetitiveness will be found very annoying.
Just to reiterate, the writing is unbelievably bad. Whether it be the repetition, the rambling, or the awful humor (most of it stolen from others...e.g. the "Good Will Hunting" line about library fees), the author makes reading this book as painful as possible. He spends pages and pages bemoaning those in academia, specifically what he calls "B schools" (yes, he's one of the guys that says "B school"), but if he'd lower himself to some instruction he might find the practice of outlining before writing leads to a better product (and a more terse one). He clearly sat down at the computer and started churning words. I doubt he has read this book himself.
What is unfortunate is, when he gets into his specific points on the credit crisis, he does a better job than any others I've read of explaining what all the products were and how the progressive collapse occurred. However, what would have been an excellent couple of magazine articles was wrapped in an endless (and unnecessary for the book) rant against a few MBA classes, repeating himself, uncomfortable sexual jokes, and his incessant crusade against Black, Scholes et. al. Skip this book.
Most Recent Customer Reviews
It's all been said by the other reviewers, this HuffPo writer needs to stick to forums where no one pays to read him. (or better yet, no one reads him at all).Published on January 30, 2014 by Reginald H. Henderson
Pablo Triana is a master finance wizard, he consorts with Nassim Talib, Espen Haug and is intimately familiar with other so called uber analysts, to present evidence of the market... Read morePublished on November 30, 2011 by don
Having read many of the negative reviews, I must agree with all the criticism. However, I've learned a lot qualitatively about quantitative finance reading this book and I am... Read morePublished on October 7, 2011 by Invisible Presence
As others before me, I was also led to Triana's book by the works of N.N.Taleb - that's how misleading an introduction is. Read morePublished on October 7, 2011 by Alessandro Forghieri
The writing is awful. Truly awful.
This book was obviously not edited at all. I'm amazed that the publisher (John Wiley & Sons) allowed it be released. Read more
I was, and continue to be, interested in the ideas presented in this book, but finished only about 75%. Read morePublished on September 19, 2010 by Diamante
i fell asleep trying to read this book, the writing can improve and the content is still quite useful
this pretty is about questioning the teacher,
it is... Read more
This book is the risk management equivalent of someone who says automobiles are useless because a few drivers crashed. Read morePublished on August 3, 2010 by Donald van Deventer