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Tail Risk Hedging: It Is an Asset Allocation Decision

In: Smart(er) Investing

Author

Listed:
  • Elisabetta Basilico

    (Applied Quantitative Analysis LLC)

  • Tommi Johnsen

    (University of Denver)

Abstract

Tail risk hedging gained traction after the global financial crisis (GFC) of 2008–2009 and has grown ever since. October 2008 was the second worst month for the SP500 since the mid-1980s and global investors still bear the scars of the wealth destruction possible during tail events. At the time of this writing,2 the topic is again on the tip of the tongue of every asset allocator, investor and money manager. In fact, after witnessing the second largest bull market since 1932,3 which started in March 2009 (See Fig. 6.1), the month of December 2018 proved to be a challenging one (−9,17% for the month) for investors.

Suggested Citation

  • Elisabetta Basilico & Tommi Johnsen, 2019. "Tail Risk Hedging: It Is an Asset Allocation Decision," Springer Books, in: Smart(er) Investing, chapter 6, pages 71-79, Springer.
    • Handle: RePEc:spr:sprchp:978-3-030-26692-9_6
    DOI: 10.1007/978-3-030-26692-9_6
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