How do we manage risks of very bad stuff that are beyond precise statistical quantification? Black swans etc.
Normal accidents at an existential-risk scale. Capitalism’s end game.
This is a mere placeholder, although I should have more, since it was the central concern of the Chair of Entrepreneurial Risksh where I did my MSc under the supervision of Didier Sornette.
For policy
See science for policy.
In financial markets
Prediction via markets
See prediction markets.
Incoming
Nassim Taleb has a whole career based on handling heavy-tailed risk and managing out-of-sample downsides (Taleb 2007, 2020).
Eliezer Yudkowsky, Moore’s Law of Mad Science:
Every eighteen months, the minimum IQ necessary to destroy the world drops by one point.
Fun but implausibly simple differential equation models of civilisational implosion.
References
Chernov, Dmitry, and Didier Sornette. 2016. Man-made catastrophes and risk information concealment: case studies of major disasters and human fallibility. Management/Business for professionals. Cham: Springer.
Cirillo, Pasquale, and Nassim Nicholas Taleb. 2020. “Tail Risk of Contagious Diseases.” Nature Physics 16 (6): 606–13.
Dai, Lei, Daan Vorselen, Kirill S Korolev, and Jeff Gore. 2012. “Generic Indicators for Loss of Resilience Before a Tipping Point Leading to Population Collapse.” Science 336 (6085): 1175–77.
Filimonov, Vladimir, David Bicchetti, Nicolas Maystre, and Didier Sornette. 2014. “Quantification of the High Level of Endogeneity and of Structural Regime Shifts in Commodity Markets.” Journal of International Money and Finance, Understanding International Commodity Price Fluctuations, 42 (April): 174–92.
Filimonov, Vladimir, and Didier Sornette. 2012. “Quantifying Reflexivity in Financial Markets: Toward a Prediction of Flash Crashes.” Physical Review E 85 (5): 056108.
Helmstetter, A., D. Sornette, and J.-R. Grasso. 2003. “Mainshocks Are Aftershocks of Conditional Foreshocks: How Do Foreshock Statistical Properties Emerge from Aftershock Laws.” Journal of Geophysical Research 108 (B1): 2046.
Holling, C. S. 2001. “Understanding the Complexity of Economic, Ecological, and Social Systems.” Ecosystems 4 (5): 390–405.
Johansen, Anders, and Didier Sornette. 2001. “Finite-Time Singularity in the Dynamics of the World Population, Economic and Financial Indices.” Physica A: Statistical Mechanics and Its Applications 294 (3–4): 465–502.
Lux, Thomas, and Didier Sornette. 2002. “On Rational Bubbles and Fat Tails.” Journal of Money, Credit and Banking 34: 589–610.
Malevergne, Yannick, and Didier Sornette. 2003. “Testing the Gaussian Copula Hypothesis for Financial Assets Dependences.” Quantitative Finance 3 (4): 231–50.
Malevergne, Y, and D Sornette. 2005. Extreme Financial Shocks : From Dependence to Risk Management. Berlin; London: Springer.
Palen, Leysia, and Kenneth M. Anderson. 2016. “Crisis Informatics—New Data for Extraordinary Times.” Science 353 (6296): 224–25.
Sornette, D, and A Helmstetter. 2003. “Endogenous Versus Exogenous Shocks in Systems with Memory.” Physica A: Statistical Mechanics and Its Applications 318 (3–4): 577–91.
Sornette, Didier. 2003. “Critical Market Crashes.” Physics Reports 378 (1): 1–98.
———. 2006. “Endogenous Versus Exogenous Origins of Crises.” In Extreme Events in Nature and Society, 95–119. The Frontiers Collection. Springer.
———. 2009a. “Probability Distributions in Complex Systems.” In Encyclopedia of Complexity and Systems Science, edited by Robert A. Meyers, 7009–24. Springer New York.
———. 2009b. “Dragon-Kings, Black Swans and the Prediction of Crises.” arXiv:0907.4290 [Physics] 2 (1).
Sornette, Didier, and Peter Cauwels. 2012. “The Illusion of the Perpetual Money Machine.” SSRN Scholarly Paper ID 2191509. Notenstein Academy White Paper Series. Rochester, NY: Social Science Research Network.
———. 2015. “Managing Risk in a Creepy World.” Journal of Risk Management in Financial Institutions 8 (1): 83–108.
Sornette, Didier, Fabrice Deschâtres, Thomas Gilbert, and Yann Ageon. 2004. “Endogenous Versus Exogenous Shocks in Complex Networks: An Empirical Test Using Book Sale Rankings.” Physical Review Letters 93 (22): 228701.
Sornette, Didier, Thomas Maillart, and Giacomo Ghezzi. 2014. “How Much Is the Whole Really More Than the Sum of Its Parts? 1 ⊞ 1 = 2.5: Superlinear Productivity in Collective Group Actions.” PLoS ONE 9 (8): e103023.
Sornette, Didier, Ryan Woodard, Wanfeng Yan, and Wei-Xing Zhou. 2013. “Clarifications to Questions and Criticisms on the Johansen–Ledoit–Sornette Financial Bubble Model.” Physica A: Statistical Mechanics and Its Applications 392 (19): 4417–28.
Sornette, D., Y. Malevergne, and J.-F. Muzy. 2004. “Volatility Fingerprints of Large Shocks: Endogenous Versus Exogenous.” In The Application of Econophysics, edited by Hideki Takayasu, 91–102. Springer Japan.
Sornette, D., and S. Utkin. 2009. “Limits of Declustering Methods for Disentangling Exogenous from Endogenous Events in Time Series with Foreshocks, Main Shocks, and Aftershocks.” Physical Review E 79 (6): 061110.
Tainter, Joseph A. 1988. The Collapse of Complex Societies. Cambrige: Cambridge University Press.
———. 2006. “Archaeology of Overshoot and Collapse.” Annual Review of Anthropology 35 (1): 59–74.
Taleb, Nassim Nicholas. 2007. “Black Swans and the Domains of Statistics.” The American Statistician 61 (3): 198–200.
———. 2010. The Black Swan:The Impact of the Highly Improbable: With a new section: “On Robustness and Fragility”. 2nd ed. edition. New York: Random House Publishing Group.
———. 2018. “Election Predictions as Martingales: An Arbitrage Approach.” Quantitative Finance 18 (1): 1–5.
———. 2020. “On the Statistical Differences Between Binary Forecasts and Real-World Payoffs.” International Journal of Forecasting, April.
Wheatley, Spencer, Benjamin Sovacool, and Didier Sornette. 2017. “Of Disasters and Dragon Kings: A Statistical Analysis of Nuclear Power Incidents and Accidents.” Risk Analysis 37 (1): 99–115.
Yukalov, V.I., E.P. Yukalova, and D. Sornette. 2009. “Punctuated Evolution Due to Delayed Carrying Capacity.” Physica D: Nonlinear Phenomena 238 (17): 1752–67.
No comments yet. Why not leave one?