The approach we propose in this book does not stand in a vacuum, but is related (sometimes, perhaps, in terms of opposition) to well-established ways of looking at asset allocation in general, and at exceptional events in particular. It is therefore useful to explain where we stand with respect to these important topics. This we do in the next two parts of the book.

In Part II we start by positioning our proposed approach in the context of predictability and causation in finance; we specialize the discussion in Chapters 5 and 6 to the treatment of outliers. Then, in Part III, which is dedicated to diversification, we will move to the asset-allocation aspect proper, with a discussion of selected topics in the approaches by Markowitz (Chapters 7 and 8), Black–Litterman and Doust (Chapter 9). We will then conclude Part III by looking in Chapter 10 at a recent approach (by Meucci) which presents interesting similarities with – and differences from – our way of looking at the problem of asset allocation.