Where do Black Swans come from?
Since the released of Nassim Taleb's book "The Black Swan: The Impact of the Highly Improbable" in 2007 during the subprime crisis , the elegant-but-mysterious bird has become the symbolic representation of abnormal dangerous events, deviations from normality or heavy tails . Since then the Gallina has become more threatening than a whole assembly of market bears - it represents what hits you more because it is the threat you cannot see, you cannot measure, you cannot compute! All the algorithms and high performance of all modern quant-technology inspired by the wise men like Gauss, Black or Scholes are of no use against the inaccessible powers of the magic bird. From Black & Scholes to Black Swans In another era "the BS conditions" were standing for "Black & Scholes" conditions assuming "log-normality" of returns and constant volatility. Now that the monster has appeared "the BS conditions" are likely to take a new signifi...