What is tail risk with 10 examples

Tail risk refers to the risk of rare and extreme events that can have a significant impact on investments or other financial assets. In layman’s terms, it’s the risk that something unexpected and negative will happen, such as a stock market crash or a natural disaster, which can cause large losses for investors. This type of risk is often difficult to predict or manage, and can be particularly challenging for investors to protect against.

Here are 10 examples of tail risk:

  1. Market crashes or sudden economic downturns
  2. Natural disasters such as hurricanes or earthquakes
  3. Pandemics or other global health crises
  4. Cyber attacks or data breaches
  5. Political instability or war
  6. Geopolitical tensions or trade disputes
  7. Climate change and its impact on economies and industries
  8. Defaults or bankruptcies of major companies
  9. Terrorist attacks or acts of sabotage
  10. Large-scale power outages or other infrastructure failures