Pandora’s Risk : Uncertainty at the Core of Finance.

Enhanced descriptions from Syndetics:

Author of the acclaimed work Iceberg Risk: An Adventure in Portfolio Theory , Kent Osband argues that uncertainty is central rather than marginal to finance. Markets don't trade mainly on changes in risk. They trade on changes in beliefs about risk, and in the process, markets unite, stretch, and occasionally defy beliefs. Recognizing this truth would make a world of difference in investing. Belittling uncertainty has created a rift between financial theory and practice and within finance theory itself, misguiding regulation and stoking huge financial imbalances.

Sparking a revolution in the mindset of the investment professional, Osband recasts the market as a learning machine rather than a knowledge machine. The market continually errs, corrects itself, and makes new errors. Respecting that process, without idolizing it, will promote wiser investment, trading, and regulation. With uncertainty embedded at its core, Osband's rational approach points to a finance theory worthy of twenty-first-century investing.

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Library Journal Review

In his preface, economist Osband (Iceberg Risk) imagines himself conversing with Pandora and Prometheus, who implore him to write a book about the risks Pandora unleashed on the world. Osband replies that he would have to write two books, one for the layperson and one for the expert. The mythic beings convince him to combine the two, creating a book of two minds, in which the reader is expected "to have a sound grounding in economic history, finance theory, and statistics [and to] enjoy mathematical modeling." His basic thesis: that it's impossible to calculate every financial risk, and uncertainty is therefore a central component of financial markets. Rather than knowledge centers, financial markets are learning environments that continually err and learn from their errors. Recognizing the centrality of error to finance, Osband argues, can lead to better regulation. Verdict Osband shunts most of the complicated mathematics to an appendix, but what remains is still quite academic; the book's true audience is finance graduate students and practitioners.-Heidi Senior, Univ. of Portland Lib., OR (c) Copyright 2011. Library Journals LLC, a wholly owned subsidiary of Media Source, Inc. No redistribution permitted.