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Plight of the Fortune Tellers: Why We Need to Manage Financial Risk Differently Hardcover – 7 Oct 2007

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Product details

  • Hardcover: 304 pages
  • Publisher: Princeton University Press; First edition. Hardback. Dust jacket. edition (7 Oct. 2007)
  • Language: English
  • ISBN-10: 0691133611
  • ISBN-13: 978-0691133614
  • Product Dimensions: 23.7 x 16.5 x 2.4 cm
  • Average Customer Review: 3.2 out of 5 stars  See all reviews (5 customer reviews)
  • Amazon Bestsellers Rank: 539,015 in Books (See Top 100 in Books)
  • See Complete Table of Contents

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"[Plight of the Fortune Tellers] was written to appeal to a wide audience. Stylistically, Rebonato is an engaging writer who uses analogies and interesting examples...I'm confident you'll enjoy this book and that, after reading it, you will join in the dialog that Rebonato has started."--Garp Risk Review

"In his new book, Plight of the Fortune Tellers, Rebonato shows... why Merrill Lynch and Citigroup shareholders are right to be concerned. Nowhere have I read a better account of how a conscientious, intellectually disciplined market risk manager approaches his work in today's complex world. Well known to Risk readers as a master of interest rate modeling, Rebonato has written an accessible, non-technical book."--Nicholas Dunbar, Risk

"In Plight of the Fortune Tellers, Rebonato analyzes and offers solutions to problems related to quantitative risk management strategies and the value-at-risk (VAR) methodology currently used by financial managers. Through stories, examples, theory, and practical methods, he first provides a critical review of the current state of affairs in investment risk management. Then, he proposes how we should 'revisit our ideas about probability in financial risk management' and 'put decision making back at center stage.' In Plight of the Fortune Tellers contains valuable insights into the development of VAR methodology and problems associated with its use in the present financial management arena. . . . In Plight of the Fortune Tellers is a book recommended for practitioners currently involved in quantitative methods and for students of investments and risk management at the graduate school level."--James Jackson, CFA Digest

"This is an enjoyable, approachable book that may be read by anyone with an analytical mind. It is free of mathematics, yet it makes no concessions when it comes to explaining the complexities of a problem...I found a flowing prose that was a pleasure to read...[P]light of the Fortune Tellers is a great wake-up call for the industry. It deserves to be widely read since we all would like to be able to rely on the stability of the financial sector. It would be nice to get the risk management right."--Jessica James, Physics World

"Remember that feeling of bewilderment after your first few weeks in your first job after university? That wrenching realization that, while the theories that you had laboured to understand may have been illuminating, they were too abstract to be applied to the real world? Reading Riccardo Rebonato's intriguing book brings those memories flooding back. For while Rebonato well understands, approves of, and writes about quantitative probability and risk theory, his day job involves actually managing financial risk. Hence he appreciates the limits both of theory and of applying it to real world situations. . . . There is considerably more meat in this wise, practical, yet unpretentious book than can be summarized in a short review."--John Llewellyn, The Business Economist

"Riccardo Rebonato is a better fortuneteller than the risk analysts he writes about. He has read the palms of the 'quants' who revel in developing ever more complex risk models and found that their 'real life' line is rather short. But apart from confirming the prejudices of a financial journalist with no statistical training, is this book worth reading? The answer is yes. It is timely; the subject--financial risk management--matters hugely; it provides a relatively accessible guide to annoyingly influential statistical theories; and it makes you think."--Financial World online

"Plight of the Fortune Tellers is insightful and entertaining. It provides a non-technical yet sophisticated introduction to the perils of modern risk management and it has the potential to lead us in a better direction. Don't miss it."--Lisa R. Goldberg, Journal of Investment Management

"This book should be on the reading list of experienced risk managers in the financial services industry as well as students who are contemplating a career in the field. It provides a thoughtful qualitative companion to more equation-laden texts on modern risk management."--Moshe A. Milevsky, Journal of Pension Economics and Finance

From the Back Cover

"A fascinating book that very comprehensibly covers the evolution of risk management. Very interesting perspective, accessible to all--from experienced market practitioners to interested beginners."--Jonathan P. Moulds, Bank of America

"While others build straw men only to tear them down, Rebonato stands on the intellectual foundations of his profession to both articulate its weaknesses and suggest a plan for material advancement. This he does with respect, precision, and humor, making Plight of the Fortune Tellers a welcome oasis in the desert of dry risk management texts."--David Shimko, Towers Perrin

"Riccardo Rebonato provides a refreshingly clear and skeptical analysis of the limitations of quantitative risk management, the naïveté of too many decimal places, and the sloppy ways in which people talk about probability."--Emanuel Derman, Columbia University, head of risk at Prisma Capital Partners, and author of My Life as a Quant: Reflections on Physics and Finance

"This is a unique book: a treatise on risk management with no equations! Since equations are frequently substituted for thought in this area, the book is long overdue. Riccardo Rebonato is one of the leading technical writers in this area, and now brings his experience to bear on the elephant in the room of risk management: do the equations do what their advocates claim? All will benefit from Rebonato's insights, including his proposals for how to reform risk management."--Ian Cooper, London Business School

"In this elegant and controversial book, the author discusses and rejects the current paradigm of quantitative risk management. Rather than the traditional frequentist methods, he advocates using probabilities-as-degree-of-belief and probabilities-as-revealed-by-actions as better approaches to decision making under financial uncertainty. General readers as well as risk-management professionals, students, and academics will find this book exciting and illuminating."--Alexander Lipton, managing director, global head of credit analytics, Merrill Lynch International

"An extremely timely book that will no doubt cause a stir. It is a reality check that carries great authority because of the author's experience and position in the industry and his knowledge of both the business end and the technical side. This is a well-written, entertaining book that will generate a lot of debate in the financial industry about the future of quantitative risk management."--Alexander J. McNeil, coauthor of Quantitative Risk Management

"Very engaging and in places quite provocative. This book will be a wake-up call for the financial risk management industry. Certainly a good read."--Lane Hughston, King's College London

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Customer Reviews

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Most Helpful Customer Reviews

4 of 4 people found the following review helpful By Pliny on 19 Feb. 2008
Format: Hardcover
This does for financial risk management what Prof Hawking did for physics - puts it in English. There are no formulae in the book, making it accessible to non-mathematical readers. The early chapters are a little hard going, but this is a complicated subject and perseverance is repaid. It is an excellent discussion of current risk practice with some clear lessons for both the expert and the interested amateur. It should be required reading for anyone who wants to talk about 'economic capital' or any risk/reward metric and sound halfway sensible. Also the quote about Basel II ('looks like it was written without adult supervision') is spot on.
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By Rolf Dobelli TOP 1000 REVIEWER on 1 Sept. 2009
Format: Hardcover
Reading this book is like reading the prophecies of Cassandra, whose fate was to speak the truth to the unbelieving. In the wake of the fiscal crisis, no one can question the observation that the practice of financial risk management has serious flaws. Business journalist Riccardo Rebonato's discussion of why and how financial institutions misunderstand and mismanage risk provides valuable insights. He works to make his ideas accessible beyond the narrow circles of financial economists and quantitative risk managers. He uses no equations in the text, and his few graphs are clear and accessible. He states his case against excess reliance on statistical methods in plain language. getAbstract believes that his analysis should interest any manager or regulator whose responsibilities include oversight of finance.
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By S. Chandramouli on 16 Jan. 2013
Format: Kindle Edition Verified Purchase
I resisted writing a review for this book for a while because I was waiting to sell mine used to some unsuspecting buyer. But it's been more than a while now and I can't get rid of this 'tome' ! If you want some incoherent rambling about the possible application of Bayesian probability to financial risk management, interspersed with charts of normal distributions that add nothing to the text this is the book for you. And I'll make you a deal you can't resist.
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2 of 3 people found the following review helpful By Prof J E McLACHLAN on 27 April 2009
Format: Hardcover
I found this a deeply depressing book. Not because of its faults, but because it foretold so much of the financial catastrophe which has melted the reputations of bankers and also the share prices of their banks.
If the employers of the author - the Royal Bank of Scotland - had listened to him, then so much of what has happened in the financial melt down would not have happened or at worst been rather less severe.
It is rather depressing on the weight given in risk evaluation by use of statistics (virtually no equations are used in this book) and points out the dangers of this approach. Wise words - oh that many had listened to them in financial circles in recent years.
A demonstration of hind sight which was there for the taking before the disaster struck - if only it had been heeded - the fate of many who forecast correctly.
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1 of 6 people found the following review helpful By James-philip Harries on 5 Aug. 2009
Format: Hardcover Verified Purchase
The author was head of risk at Royal Bank of Scotland as the board accelerated the bank into catastrophe. Maybe he wrote this book in frustration that his warnings were ignored?

He shows that despite the wizz-bang sophisticated maths risk management in banks doesn't actually model the real world very well. (Who would have thought it?)

His solution is a kind of kinder, gentler, fuzzier sort of wizz-bang mathematics.

I think we can continue to ignore him a while yet.

For a better overview, read A Demon of Our Own Design: Markets, Hedge Funds, and the Perils of Financial Innovation
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