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February 28, 2007

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Bernard Guerrero

Bernard, what makes you think the Spanish solved the fat tails problem?

"Solved" is too strong a word; I said "handled" for a reason. As to why I figured they had some method of doing so, it was due to the (perhaps unwarranted) belief that the risks associated with that particular activity would be particularly subject to rare-but-massive losses of the sort we chalk up to the "fat tail" problem. Years without a major loss and then a Vincent Bocquet of Dieppe takes out more than half of the Flota overnight. Or not.

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