Tail Risk Hedging: A Roadmap for Asset Owners

Discussion in 'Professional Trading' started by ASusilovic, Jun 26, 2011.

  1. Deutsche Bank Pension Strategies & Solutions
    May 2010

    Mounting Tail Risk Concerns
    Following the traumatic events of the last two years, risk and its management have become the
    most visible subject within the asset owner world. As part of the management of the risk, tail risk
    hedging has taken center stage.
    This paper aims to provide a clear, step‐by‐step guide to the process of hedging tail risk across
    many asset types. We hope that it is able to provide useful examples, common‐sense solutions,
    and advantage/disadvantage analysis of various approaches. We have made every effort to make
    its content clear, concise, and useful. Although Deutsche Bank Global Markets does not act in a
    fiduciary capacity and this document is provided for informational purposes only, we hope that it
    can serve as a positive step toward helping our clients make informed decisions.


    Tail risk is technically a risk of a portfolio value move of at least three standard deviations (3σ)
    from the mean and is more probable (frequent) than anticipated by a normal distribution.

    Have fun! :)