Tail-Risk Parity: The Quest for a Crash-Proof Portfolio

Michael DePalma By any name—Black Swan, three-standard-deviation event or negative tail event—the risk of unexpected heavy losses is a major concern for investors. The question is how best to protect against these low-probability, high-impact market moves.

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Japan and the Euphoric Volatility Trap

Michael DePalma (pictured) and Arnab Nilim When equity markets are buoyant and optimism abounds, fears of volatility tend to subside. But recent events in Japan remind us that euphoria itself can generate turbulence.

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LDI: More on Going Global in Bonds

For liability-driven investors, exposure to global bonds offers important benefits: a strong correlation to domestic debt, with greatly reduced volatility. However, these are not the only positives. Today, we’ll look at some other important benefits—such as greatly expanding the investable universe and offering a natural hedge against the tail risk of a domestic credit crisis—and [...]

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