The game-changing financial meltdown of 2008 caught everyone by surprise. A Stevens Institute of Technology professor believes a redesigned financial system and integrated models could do a better job of preventing the next downturn.
By Alan S. Brown
Special to the Stevens News Service
As a boy growing up in Damascus, Syria, Khaldoun Khashanah found mathematics compelling. “What I liked best were the abstract patterns, and math’s ability to reveal the interrelations between the real and the abstract in unique ways. Math lets us look through that window,” Khashanah explained.
Maybe that is why Khashanah, the director of Stevens Institute of Technology’s Financial Engineering program, has a problem with Black Swans.
Black Swans are those seemingly impossible, game-changing events popularized by Nassim Nicholas Taleb in his 2007 book, The Black Swan. Taleb picked the name because Europeans thought all swans must be white, until they discovered black swans in Australia during the Eighteenth Century.
According to Taleb, a Black Swan has three characteristics: First, it is so rare, “nothing in the past can point convincingly to its possibility.” Second, it has very high impact. Third, people “concoct explanations for its occurrence after the fact, making it explainable and predictable.” (more…)