What does tail risk mean?
Definitions for tail risk
tail risk
This dictionary definitions page includes all the possible meanings, example usage and translations of the word tail risk.
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Wikipedia
Tail risk
Tail risk, sometimes called "fat tail risk," is the financial risk of an asset or portfolio of assets moving more than 3 standard deviations from its current price, above the risk of a normal distribution. Prudent asset managers are typically cautious with tail risk involving losses which could damage or ruin portfolios, and not the beneficial tail risk of outsized gains.The common technique of theorizing a normal distribution of price changes underestimates tail risk when market data exhibit fat tails. Tail risk is sometimes defined less strictly: as merely the risk (or probability) of rare events. The arbitrary definition of the tail region as beyond 3 standard deviations may also be broadened, such as the SKEW index which uses the larger tail region starting at 2 standard deviations.
Numerology
Chaldean Numerology
The numerical value of tail risk in Chaldean Numerology is: 8
Pythagorean Numerology
The numerical value of tail risk in Pythagorean Numerology is: 9
Examples of tail risk in a Sentence
The market has witnessed this before - it remembers the brinkmanship during the Greek debt negotiations of 2011. There are only nine trading days left until the Feb. 28 deadline but some see that as enough time. Thus we are not seeing the euro sold in panic, on the other hand tail risk is definitely rising. This is limiting bargain-hunting of the euro by short-term players and the currency will remain under selling pressure.
The market had been a bit optimistic about an agreement so it was a bit of a surprise, but from the past experience during the euro zone debt crisis, the market is also accustomed to negotiations dragging on until the very last minutes. So while the tail risk appears to be rising, there is no panic in the market.
For markets the upshot is that the outlook for 2019 is looking better as tensions de-escalate, creating the potential for a re-rating of risk assets as the tail risk of a near-term trade war is partially priced out, this is especially the case in Asia.
Options on VIX futures are right now attractive as an approach to hedging tail risk.
The market had been a bit optimistic about an agreement so it was a bit of a surprise, but from the past experience during the euro zone debt crisis, the market is also accustomed to negotiations dragging on until the very last minute. So while the tail risk appears to be rising, there is no panic in the market.
References
Translations for tail risk
From our Multilingual Translation Dictionary
- ریسک دمPersian
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"tail risk." Definitions.net. STANDS4 LLC, 2024. Web. 3 May 2024. <https://www.definitions.net/definition/tail+risk>.
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