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NOVEMBER 3, 2008
October Pain Was 'Black Swan' Gain
By
SCOTT PATTERSON
For most of October, it seemed nearly everything that could go wrong with the markets did. But the rout
turned into a jackpot for author and investor Nassim Nicholas Taleb.
Mr. Taleb last year published "The Black Swan," a best-selling book about the impact of extreme events
on the world and the financial markets.
He also helped start a hedge fund, Universa Investments L.P.,
which bases many of its strategies on themes in the book, including how to reap big rewards in a sharp
market downturn. Like October's.
Nassim Nicholas Taleb
Separate funds in Universa's so-called
Black Swan Protection Protocol were up by a range of 65% to
115% in October, according to a person close to the fund. "We're discovering the fragility of the financial
system," said Mr. Taleb, who says he expects market volatility to continue as more hedge funds run into
trouble.
A professor of mathematical finance at New York University, Mr. Taleb believes investors often ignore the
risk of extreme moves in the market, especially when times are good and volatility is low, as it was for
several years leading up to the current turmoil. "Black swan" alludes to the belief, once widespread, that
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- Fall '09
- RichardMarin
- Black swan theory, Nassim Nicholas Taleb, Mr. Taleb, Mark Spitznagel
-
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