Tail risk

Tail risk refers to an outside chance that an investment will experience a sudden fall from its average value (technically it could also apply to a sudden increase in value, but that isn’t how this tends to be used). Strictly, the phrase is referring to a move which is at least three standard deviations away from the average price.

Tail Hedging or Tail Hedge

Tail Hedging Funds are designed to benefit when extreme events occur. So-called Black Swan events (named after Australia’s Black Swans, an animal so alien to European minds that its existence couldn’t be foretold) could impact the value of all assets (when assets fall or rise in tandem they are said to be positively correlated). Tail […]

Basel IV

Basel IV describes the changes agreed in 2016 and 2017 to the international banking standards known as the Basel Accords. Basel IV introduces changes that limit the reduction in capital that can result from banks’ use of internal models under the Internal Ratings-Based* approach. These include: A standardised floor, so that the capital requirement will always […]

Prospectus

A Prospectus is a formal legal document that is required by and filed with Stock Exchange Authorities and Regulators that provides details about an investment offering for sale to the public. See Initial Public Offering (IPO). The prospectus is the first offering document provided by a company and includes most of the details of the business and legal structures. An investment Company Prospectus […]

Protection strategies

Some hedge fund strategies are designed to make money when other assets are falling in value. Collectively these can be referred to as protection strategies. The simplest of these is a net short equity or credit fund but other types exit including Negative Correlation funds that seek out investments that benefit when certain asset prices […]

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Tail risk