At Raphaël's request, Patrice jumped several slides. Under Fat Tails, we know that the probability denisty in the middle looks thinner as we can observe here... 25/n
The LogDensity shows that the Gaussian is the thinner, logit comes next, the fatter tails are the distributions with discontinued trait lines... 16/n
I messed up the thread... 26/n
French gold market: very fat tails, kappa/alpha almost 4 and almost no kurtosis. The quantity we will need to cover our investment changes a lot, can double a normal portfolio/Markowitz... 27/n
Société Générale had the Kerviel scandal, Vivendi before had a "Messier" scandal as he made the utilities company run out of money with investments in Hollywood. The risk of these in the market and the money needed to cover these positions... 28/n
VIX: Fat-Tailed and very asymmetrical. 29/n
Patrice shows as a short clip of the SP500 evolution, Raphaël comments that for the SP500 returns and log returns don't make a big difference. 30/n
Quintile estimation: one manages to do an estimation with 5 data points only. We can estimate the distribution by say knowing what are the values at 99% (and 1%) and 75% (so 25%)... 31/n
The moments have a correspondence with the Pareto parameters. Potential use? Manage risk (regulation, VCs), Portfolio management, etc. One of his R packages is public, he recommends we backtrack his data using it. These distributions change our thinking of volatility. 32/n
Traders ask Patrice uses of this for trading. Patrice is not a trader, says he can't say but won't be surprised it can be used. He advises institutional clients on the amount of capital needed to cover their positions. Raphaël makes an observation. 33/n
"When tails get fatter, they get the more symmetric". Raphaël wraps it up, reminding us to connect tomorrow at the same time for @DrCirillo's presentation. 34/34