Interesting article on the MIT Technology review (here), pointing out that most quantitative models on Wall Street make assumptions about the relationship between instruments and are subject to the "black swan" problem, not properly recognizing "unexpected" outliers in their strategies.
In the context of automated strategies my view is that it is fine to work within the assumptions of "normal" market behavior, provided that one has a risk management strategy to contain losses from outlier events to an amount that will not significantly erode accrued profits. To not do so is an opportunity lost.
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