ETFs, Volatility and Leverage: Towards a New Leveraged ETF

Re:ETFs, Volatility and Leverage: Towards a New Leveraged ETF by smabie on Sunday April 05, 2020 @10:12PM (#22790360)

Hi, I wrote the post. I discussed the problem of non-normality in the post. Moreover, if non-normality is the problem, then pretty much all of modern finance is invalidated. Instead of saying its all bullshit, a better approach is to realize the assumptions of the model and use some discretion in trading based on its output.

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Re:ETFs, Volatility and Leverage: Towards a New Leveraged ETF by nlitened on Monday April 06, 2020 @02:37AM (#22791366)

> Moreover, if non-normality is the problem, then pretty much all of modern finance is invalidated.

I’d say, finance from the 70s is invalidated. And it has been invalidated countless times with all the major mutual funds going bust.

I’d love to encourage you to read more on this topic. Taleb’s “The Black Swan” is a good start, his other books are also good.

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Re:ETFs, Volatility and Leverage: Towards a New Leveraged ETF by smabie on Monday April 06, 2020 @01:57PM (#22796080)

Black Scholes, VaR, factor models, CAPM, modern portfolio theory, etc are all based on the normal distribution and are all still used in industry today. Every quant fund in the world is using models that assume a log normal distribution of returns. Moreover, Taleb certainly used models based on log normal distributions at his hedge funds.

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