Tail Risk Protection in Asset Management
42 Pages Posted: 16 Nov 2014
Date Written: November 11, 2014
Tail risk refers to the possibility that a rare event would adversely affect the value of a portfolio in a significant manner. It became much more relevant due to recent periods of strong market turbulence.
We describe how to quantify such risk, which tail risk protection strategies were considered in the literature, their effectiveness and associated costs. We also review strategies that may be profitable,and thus can be used for more than just defensive purposes.
Keywords: portfolio management, risk management, asset allocation, performance measures, risk parity, risk measures, factor investing, robust estimation, optimization, diversification, smart beta, leverage, testing, stress, tail risk, hedging
JEL Classification: C11, C12, C13, C14, C15, C51, C52, C63, G11, G12
Suggested Citation: Suggested Citation