Reddit reviews Against the Gods: The Remarkable Story of Risk

Hm , thats a good question. I am a designated actuary and I am not aware of a single book that covers all the basics.

The two main papers of CAS exam 5 may be helpful for learning the basics of pricing and reserving:

http://www.casact.org/library/studynotes/Werner_Modlin_Ratemaking.pdf

http://www.casact.org/library/studynotes/Friedland_estimating.pdf

For historical context of insurance and financial risk, this is a very good book. Although you wouldn't learn any of the details of how an insurance company is run:

https://www.amazon.com/Against-Gods-Remarkable-Story-Risk/dp/0471295639

Good luck!

Against The God: the remarkable story of Risk- Outlines the history of probability theory and risk assessment through the centuries

https://www.amazon.com/Against-Gods-Remarkable-Story-Risk/dp/0471295639/ref=sr_1_1?s=books&ie=UTF8&qid=1475105434&sr=1-1&keywords=against+the+gods

When Genius Failed - A narrative of the spectacular fall of Long Term Capital Management, a hedge fund which had on its board both Myron Scholes AND Robert Merton (you will recall them from MFE)
https://www.amazon.com/When-Genius-Failed-Long-Term-Management/dp/0375758259/ref=sr_1_1?s=books&ie=UTF8&qid=1475105453&sr=1-1&keywords=when+genius+failed

Black Swan/ Antifragility- A former quant discusses the nature of risk in these controversial and philosophical books. Some parts of this book are actually called out and shamed in McDonald's Derivative Markets, one or the both of them are worth reading

https://www.amazon.com/Black-Swan-Improbable-Robustness-Fragility/dp/081297381X/ref=sr_1_1?s=books&ie=UTF8&qid=1475105478&sr=1-1&keywords=black+swan



Godel, Escher, Bach- Very dense look into recursive patterns in mathematics and the arts. While not actuarial, it's obviously very mathematical, a must read.

https://www.amazon.com/G%C3%B6del-Escher-Bach-Eternal-Golden/dp/0465026567/ref=sr_1_1?s=books&ie=UTF8&qid=1475105497&sr=1-1&keywords=geb

Endurance- This was recommended to me by a pure mathematics professor. Again, not actuarial, but more about the nature of perseverance though problem solving(sound familiar). It's about Shakleton's famous voyage to the south pole.

https://www.amazon.com/Endurance-Shackletons-Incredible-Alfred-Lansing/dp/0465062881/ref=sr_1_1?s=books&ie=UTF8&qid=1475105520&sr=1-1&keywords=endurance+shackleton%27s+incredible+voyage

Source: (a book...I know, I know, how barbaric)

http://www.amazon.com/gp/aw/d/0471295639?pc_redir=1412736805&robot_redir=1

Edit: also http://www.etymonline.com/index.php?term=bank

I guess it's old Italian, not middle Italian. You read enough etymology of financial terms and it all becomes Latin, French and Italian.

This is about the history of risk and the progress of risk management through the ages. Completely readable. Recommended.

http://www.amazon.com/Against-Gods-Remarkable-Story-Risk/dp/0471295639

What that, interested in the history of insurance? Boy have i got a treat for you.

Against the Gods - takes your from ancient games of risk to medieval life insurance to the Great Depression.

Well, first of all, there have always been booms and busts. Does that prove that there necessarily must be such a cycle? No, it is not complete proof, but it is compelling evidence that, no matter what the level of technology has been, no matter what the language or culture of the participants have been, and no matter what form of government they were under, the business cycle has always been around.

The other piece of the evidence is that attempts to remove booms and busts from the economy have failed miserably. Our own Fed, designed to do just that, has never been able to eliminate booms and busts from the cycle. They have tried, and had success in certain cases, but often their actions simply reshape the boom and bust cycle in new forms. Socialist economies suffer economic cycles. Communist countries certainly do, and in some cases, their booms and busts are even more exaggerated than those in market economies.


There are no "institutions" that can prevent this. It has to do with fundamental aspects of human nature:

1. Humans are very bad at judging certain types of risk, especially financial risk
   
   
2. We don't always act in our long-term, rational self-interest, and have a tendency to forget past mistakes ("This time things will be different")
   
   
3. Efficient markets are often overpowered by the "wisdom" of crowds
   
   
4. etc, etc
   
   
   So, the question you ask is far too broad. The onus is on you to educate yourself about this phenomenon. There are plenty of resources, but I suggest Devil Take The Hindmost and Against The Gods: The Remarkable Story of Risk.

It's kind of shame that there aren't more good books out there on these topics. And that a lot of what is out there is shameless self-help-style wankery.

Here's what I'd suggest: Jump straight into good stories about finance, and pick-up the lingo and concepts as you go. Investopedia -- despite the cheesey name -- is a great resource for when you encounter an idea with which you're unfamiliar.

Good stories about finance include:

• Michael Lewis has, to my knowledge, never written a bad book, but Liar's Poker and The Big Short are great places to start.
  
• Roger Lowenstein's When Genius Failed is a good story about the hubris of hedge funds.
  
• James Stewart's Den of Thieves does a great job of covering the bond market and the white-collar insider-trading scandals of the 1980s. His Disney War is also a great introduction to corporate governance, in addition to being a novel-esque good read.
  
  On a more abstract, less story-based level, you might also look at:
  
  
  
• Taleb's Fooled by Randomness, the precursor to the much-lauded "Black Swan" (and in my opinion, the much superior book).
  
• Bernstein's Against the Gods, which gives a broad (and accessible) tour of how humans throughout history came to understand and build whole markets around probability and risk.
  
  Good luck!

Why the West Rules - for now is a good overview of history written in an easily accessible way - with history, social sciences and economics thrown in.

For a great easy read on financial history, I recommend Niall Ferguson's The Ascent of Money, which will teach you a ton - and it includes all of the above (how influential psychology can be is astounding).

Because all good things are three, I'll throw in Against the Gods. A book on the history of risk analysis, you do get a hefty dose of psychology as well as a great understanding of how that all-important field works.

The economist has several good pieces on fat-tail risk in finance; if you don't have a subscription, use outline.com to get past the paywall.

https://www.economist.com/special-report/2010/02/11/the-gods-strike-back

https://www.economist.com/free-exchange/2010/02/16/fat-tails-illustrated

Also, Peter Bernstein's book "Against the Gods" is a history of risk through the ages. Might be good for your lit review.

​

Stats & charts-wise, Factset's: Turbulence Adjusted Risk Fat-tail pdf (just google it)

​

​

​

https://www.amazon.com/Actuary-Rural-English-Mystery-Calculated-ebook/dp/B00XQTQV00/

https://www.amazon.com/Against-Gods-Remarkable-Story-Risk/dp/0471295639/

Against The Gods

This is a great book that covers the history of risk management and it's biggest contributors starting with the creators of probability theory and statistics (Pascal, Bernoulli, Graunt, Bayes, Laplace, Galton, Gauss) to contemporary economists like Keynes. I'm only half way through but the book is becoming more market oriented and focused on what you're interested in.

Also, "Adaptive Markets" by Andrew Lo is phenomenal and is probably exactly what you're looking for. He incorporates evolutionary biology into the foundations of risk taking behavior and so much more im too lazy to type about.

Both of these books are at Barnes and noble so it might be a good idea to go skim both and see which one you like best. "Adaptive Markets" is my strong suggestion.