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 Hedging Funds are supposed to protect against that risk. They do things like buying very out of the money derivatives (derivatives that won’t have any real value unless the value of the underlying changes significantly).
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