The variance tax explains volatility drag. Articles examine long volatility strategies and the cost of tail risk hedging. Further analysis covers private equity returns and the mathematics of provably fair crash games.
Quantitative Finance
Quantitative finance articles explain volatility drag and long volatility strategies. They also examine private equity and provably fair games.
- Against All Odds: The Mathematics of 'Provably Fair' Casino Games
Statistical analysis of 20,000 crash game rounds verifies the 97% RTP claim. But 179 rounds per hour means expected losses exceed 500% of wagers hourly.
- Ambiguity by Design
Ellsberg proved people flee unknown odds. Zeckhauser showed their flight creates mispricing. Part 2 on ambiguity aversion, comparative ignorance, and investing.
- Bet Sizing at the Frontier
The Kelly Criterion assumes you know your probability of winning. In a UU world, you don't, and heuristics like Zeckhauser's Maxim B replace false precision.
- Is Private Equity Just Beta With a Lockup?
AQR's 2026 data shows private equity returning 4.2% versus 3.9% for public equities. The 30bp illiquidity premium barely justifies years of lockup.
- Long Volatility Premium
Can tail hedging improve compound returns? Review 40 years of beta-adjusted long-volatility evidence, plus AQR, Goldman, Universa, puts, trends, and costs.
- The Anatomy of a Decentralized Prediction Market: Notes from the Polymarket Order Book
I study Polymarket microstructure using 30.3 billion order-book events: spreads, depth, wash trading, and a trade-direction error that affects measurement.
- The Geometry of Who Knows What
When neither side can define the states of the world, adverse selection fears are misplaced. Zeckhauser's information matrices and constraint arbitrage.
- The Moral Philosophy of Investing in Ignorance
Constraint arbitrage, the sidecar problem, and who bears the distributional cost of investing under ignorance. The final installment of Edge of Knowledge.
- Three Kinds of Not-Knowing
Knightian uncertainty splits not-knowing into risk, uncertainty, and ignorance. A century after Knight and Keynes, most of investing still ignores the split.
- Variance Tax
Variance drain is the hidden cost of volatility: why a portfolio averaging +10% can lose money. The ½σ² formula explains the gap between paper and real returns.