📈 SigmaTrader Blog

 🎲 The Intelligent Investor’s Wager: Balancing Probability and Consequence “Risk is brewed from equal parts of probability and consequence — how likely something is to happen and how bad it would be if it did.” — Paul Slovic When we talk about investing, the conversation almost always starts with probabilities — expected returns, win rates, Sharpe ratios, or historical odds of success. But what we often underestimate is the consequence side of the risk equation — how bad the outcome could be if we are wrong. Psychologist Paul Slovic captured this dual nature of risk perfectly. Risk is not just about how likely something is to go wrong; it’s about how painful it would be if it did. The smartest investors are those who balance both — understanding that even if probabilities are unknowable, consequences can and must be managed. 🧠 Pascal’s Wager and Investing Under Uncertainty In the 17th century, Blaise Pascal proposed his famous Wager about belief in God. His argume...

In the high-stakes world of Wall Street, few stories are as dramatic—and educational—as the fall of Long-Term Capital Management (LTCM) . When Genius Failed by Roger Lowenstein is not just a finance book—it’s a powerful warning about arrogance, risk, and the illusion of control. Let’s break down what happened, who was involved, and what every investor can learn. 📚 Summary of "When Genius Failed" When Genius Failed chronicles the rise and catastrophic fall of Long-Term Capital Management (LTCM) , a hedge fund that dazzled Wall Street in the 1990s. LTCM was founded by some of the most brilliant financial minds: John Meriwether – Former vice chairman and head of bond trading at Salomon Brothers, known for pioneering arbitrage trading. Myron Scholes – Nobel Prize-winning economist, co-creator of the Black-Scholes option pricing model. Robert C. Merton – Nobel Prize-winning economist, specialized in risk and financial derivatives. Other partners included t...