FREE THE BLACK SWAN PDF Mercedes Lackey | 416 pages | 25 May 2000 | Penguin Putnam Inc | 9780886778903 | English | New York, NY, United States Black Swan () - IMDb The Black Swan black swan is an unpredictable event that is beyond what is normally expected of a situation and has potentially severe consequences. Black swan events are characterized by their extreme rarity, severe impact, and the widespread insistence they were obvious in hindsight. The term was popularized by Nassim Nicholas Taleb, a finance professor, writer, and former Wall Street trader. Taleb wrote about the idea of a black swan event in a book prior to the events of the financial crisis. Taleb argued that because black swan events are impossible to predict The Black Swan to their extreme rarity, yet have catastrophic consequences, it is important for people to always assume a black swan event is a possibility, whatever it may be, and to try to plan accordingly. Some believe that diversification may offer some protection when a black swan event does occur. Taleb later used the financial crisis and the idea of black swan events to argue that if a broken system is allowed to fail, it actually strengthens it against the catastrophe of future black The Black Swan events. He also argued that conversely, a system that is propped up and insulated from risk ultimately becomes more vulnerable to catastrophic loss in the face of rare, unpredictable events. Taleb describes a black swan as an event that 1 is so rare that even the possibility that it might occur is unknown, 2 has a catastrophic impact when it does occur, and 3 is The Black Swan in hindsight as if The Black Swan were actually predictable. For extremely rare events, Taleb argues that the standard tools of probability and prediction, such as the normal distributiondo not apply since they depend on large population and past sample sizes that are never available for rare events by definition. Extrapolating, using statistics based on observations of past events is not helpful for predicting black swans, and might even make us more vulnerable to them. The Black Swan last key aspect of a The Black Swan swan is that as a historically important event, observers are keen to explain it after the fact and speculate as to how it could have been predicted. Such retrospective speculation, however, does not actually help to predict future black swans as these can be anything from The Black Swan credit crisis to a war. The crash of the U. The effect of the crash was catastrophic and global, and only a few outliers were able to predict it happening. Also inZimbabwe had the worst case of hyperinflation in the 21 st century with a peak inflation The Black Swan of more than An inflation level of that amount is nearly impossible to predict and can easily ruin a country financially. The dotcom bubble of is another black swan event that has similarities to the financial crisis. America was enjoying rapid economic growth and increases in private wealth before the economy catastrophically collapsed. Since the Internet was The Black Swan its infancy in terms of commercial use, various investment funds were investing in technology companies with inflated valuations and no market traction. When these companies folded, the funds were hit hard, and the downside risk was passed on to the investors. The The Black Swan frontier was new so it was nearly impossible to predict the collapse. As another example, the previously successful hedge fund Long-Term Capital Management LTCMwas driven into the ground in as a result of the ripple effect caused by the Russian government's debt default, something the company's computer models could not have predicted. Trading Psychology. Investing Essentials. Fixed Income Essentials. Investopedia uses cookies to provide you with a great user experience. By using Investopedia, you accept our. Your Money. Personal Finance. Your Practice. Popular Courses. Investing Markets. What Is a Black Swan? Key Takeaways A black swan is an extremely rare event with severe consequences. It cannot be predicted beforehand, though after the fact, many falsely claim it should have been predictable. Black swan events can cause catastrophic damage to an economy by negatively impacting markets and investments, but even the use of robust modeling cannot prevent a black swan event. Reliance on standard forecasting tools can both fail to predict and potentially increase vulnerability to black swans by propagating risk and offering false security. Compare Accounts. The offers that appear in this table are The Black Swan partnerships from which Investopedia receives compensation. Related Terms Tail Risk in Investments Tail risk is portfolio risk that arises when the possibility that an investment will move more than three standard deviations from the mean is greater than what The Black Swan shown by a normal distribution. Grey Swan Definition A grey swan is an event that is possible and known, potentially extremely significant but is considered not very likely to happen. Learn About a Bubble in Economics A bubble is an economic cycle that is characterized by a rapid economic expansion followed by a contraction. Stagflation Definition Stagflation is the combination of slow economic growth along with high unemployment and The Black Swan inflation. Bank Stress Test A The Black Swan stress test is The Black Swan analysis to determine whether a bank has enough capital to withstand a negative economic shock. Anti-Fragility Definition Anti-fragility The Black Swan an idea by Nassim Nicholas Taleb, describing a category of things that not only gain from chaos but The Black Swan it to survive and flourish. Partner Links. Related Articles. Investopedia is part of the Dotdash publishing family. The Black Swan () - IMDb The black swan theory or theory of black swan events is a metaphor that describes an event that comes as a surprise, has a major effect, and is often inappropriately rationalised after the fact with the benefit of hindsight. The theory was developed by Nassim Nicholas Taleb to explain:. Taleb's "black swan theory" refers only to unexpected events of large magnitude and consequence and their dominant role in history. Such events, considered extreme outlierscollectively play vastly larger roles than regular occurrences. The phrase "black swan" derives from a Latin expression; its oldest known occurrence is from the 2nd-century Roman poet Juvenal 's characterization in his Satire VI of something being " rara avis in terris nigroque simillima cygno " "a rare bird in the lands and very much like a black swan". The importance of the metaphor lies in its analogy to the fragility of any system of thought. A set of conclusions is potentially undone once any of its fundamental postulates is disproved. In this case, the observation of a single black swan would be the undoing of the logic of any system The Black Swan thought, as well as any reasoning that followed from that underlying logic. Juvenal's phrase was a common expression in 16th century London as a statement of impossibility. However, inDutch explorers led by Willem de Vlamingh became the first Europeans to see black swansin Western Australia. Taleb notes that in the 19th century, John Stuart Mill used the black swan logical fallacy as a new term to identify falsification. Black swan events were discussed by Nassim Nicholas Taleb in his book Fooled By Randomnesswhich concerned financial events. The Black Swan book The Black Swan extended the metaphor to events outside of financial markets. Taleb regards almost all major scientific discoveries, historical events, and artistic accomplishments as "black swans"—undirected and unpredicted. He gives the rise of the Internetthe personal computer The Black Swan, World War Ithe dissolution of the Soviet Unionand the September 11, The Black Swan as examples of black swan events. Taleb asserts: [9]. What we call here a Black Swan and capitalize it is an event with the following The Black Swan attributes. The Black Swan, it is The Black Swan outlier, as it lies outside the realm of regular expectations, because nothing in the past can convincingly point to its possibility. Second, it carries The Black Swan extreme 'impact'. Third, in spite of its outlier The Black Swan, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable. I stop and The Black Swan the triplet: rarity, extreme 'impact', and retrospective though not prospective predictability. A small number of Black Swans explains almost everything in our world, from the success of ideas and religions, to the dynamics of historical events, to elements of our own personal lives. According to Taleb, the COVID pandemic is not a black swan, but is considered to be a white swan ; such an event has a major effect, but is compatible with statistical properties. The practical aim of Taleb's book is not to attempt to predict events which are unpredictable, but to build robustness against negative events while still exploiting positive events. Taleb contends that banks and trading firms are very vulnerable to hazardous black swan events and are exposed to unpredictable losses. On the subject of business, and quantitative finance in particular, The Black Swan critiques the widespread use of the normal distribution model employed in financial engineeringcalling it a Great Intellectual Fraud. Taleb elaborates the robustness concept as a central topic of his later book, Antifragile: Things That Gain From Disorder. Taleb states that a black swan event depends on the observer. For example, what may be a black swan surprise for a turkey The Black Swan not a black swan surprise to its butcher; hence the objective should be to "avoid being the turkey" by identifying areas of vulnerability in order to "turn the Black Swans white".