Pandora's Risk Uncertainty at the Core of Finance

AuthoroftheacclaimedworkIcebergRisk：AnAdventureinPortfolioTheory，KentOsbandarguesthatuncertaintyiscentralratherthanmarginaltofinance.Marketsdon'ttrademainlyonchangesinrisk.Theytradeonchangesinbeliefsaboutrisk，andintheprocess，marketsunite，stretch，andoccasionallydefybeliefs.Recognizingthistruthwouldmakeaworldofdifferenceininvesting.Belittlinguncertaintyhascreatedariftbetweenfinancialtheoryandpracticeandwithinfinancetheoryitself，misguidingregulationandstokinghugefinancialimbalances.Sparkingarevolutioninthemindsetoftheinvestmentprofessional，Osbandrecaststhemarketasalearningmachineratherthanaknowledgemachine.Themarketcontinuallyerrs，correctsitself，andmakesnewerrors.Respectingthatprocess，withoutidolizingit，willpromotewiserinvestment，trading，andregulation.Withuncertaintyembeddedatitscore，Osband'srationalapproachpointstoafinancetheoryworthyoftwenty-first-centuryinvesting.