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Fooled by Randomness
Dynamic Hedging: Managing Vanilla and Exotic Options (506 pages, 1997)
Taleb comments at his Web site (www.fooledbyrandomness.com): The book is about my own bottom-up approach to quantitative finance & risk management. I am aggressively no-nonsense, suspicious of theories (particularly those concocted by economists). It is the first step in my plan to help merge option “theory” and practice (which includes some non trivial modifications), leading to a clinical approach to stochastic processes. Here is a cartoon showing Dynamic Hedging as instrumental in the starting of a colorful and intense interoffice romance. There is no scheduled second edition yet. Once again, history has been kind to the book and the ideas presented in it –its 10th year has been the best. It is mostly used by professional option traders in training programs, risk managers, and, on the occasion, mathematical finance students. Most academics (like this one, this one, & many more) who voiced criticism about my no-nonsense approach to risks of derivatives & disliked my intrusion into the reality of the process (how could a practitioner tell us how things should be done?) have had their works & ideas steadily gliding into the purest of oblivions.
