Tail risk

By | 2017-09-13T15:47:34+00:00 13th September 2017|

Tail risk is a type of portfolio risk where the probability of an investment moving more than three standard deviations from the mean is greater than what is indicated by a normal distribution. With that movement, tail risks have a small probability of occurring and occur at the very ends of a normal distribution curve. The probability of returns moving more than three standard deviations beyond the mean is 0.03%. A tiny chance.