TAIL RISK HEDGING: Creating Robust Portfolios for Volatile Markets

TAIL RISK HEDGING: Creating Robust Portfolios for Volatile Markets PDF Author: Vineer Bhansali
Publisher: McGraw Hill Professional
ISBN: 0071791760
Category : Business & Economics
Languages : en
Pages : 272

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Book Description
"TAIL RISKS" originate from the failure of mean reversion and the idealized bell curve of asset returns, which assumes that highly probable outcomes occur near the center of the curve and that unlikely occurrences, good and bad, happen rarely, if at all, at either "tail" of the curve. Ever since the global financial crisis, protecting investments against these severe tail events has become a priority for investors and money managers, but it is something Vineer Bhansali and his team at PIMCO have been doing for over a decade. In one of the first comprehensive and rigorous books ever written on tail risk hedging, he lays out a systematic approach to protecting portfolios from, and potentially benefiting from, rare yet severe market outcomes. Tail Risk Hedging is built on the author's practical experience applying macroeconomic forecasting and quantitative modeling techniques across asset markets. Using empirical data and charts, he explains the consequences of diversification failure in tail events and how to manage portfolios when this happens. He provides an easy-to-use, yet rigorous framework for protecting investment portfolios against tail risk and using tail hedging to play offense. Tail Risk Hedging explores how to: Generate profits from volatility and illiquidity during tail-risk events in equity and credit markets Buy attractively priced tail hedges that add value to a portfolio and quantify basis risk Interpret the psychology of investors in option pricing and portfolio construction Customize explicit hedges for retirement investments Hedge risk factors such as duration risk and inflation risk Managing tail risk is today's most significant development in risk management, and this thorough guide helps you access every aspect of it. With the time-tested and mathematically rigorous strategies described here, including pieces of computer code, you get access to insights to help mitigate portfolio losses in significant downturns, create explosive liquidity while unhedged participants are forced to sell, and create more aggressive yet tail-risk-focused portfolios. The book also gives you a unique, higher level view of how tail risk is related to investing in alternatives, and of derivatives such as zerocost collars and variance swaps. Volatility and tail risks are here to stay, and so should your clients' wealth when you use Tail Risk Hedging for managing portfolios. PRAISE FOR TAIL RISK HEDGING: "Managing, mitigating, and even exploiting the risk of bad times are the most important concerns in investments. Bhansali puts tail risk hedging and tail risk management under a microscope--pricing, implementation, and showing how we can fine-tune our risk exposures, which are all crucial ways in how we can better weather our bad times." -- ANDREW ANG, Ann F. Kaplan Professor of Business at Columbia University "This book is critical and accessible reading for fiduciaries, financial consultants and investors interested in both theoretical foundations and practical considerations for how to frame hedging downside risk in portfolios. It is a tremendous resource for anyone involved in asset allocation today." -- CHRISTOPHER C. GECZY, Ph.D., Academic Director, Wharton Wealth Management Initiative and Adj. Associate Professor of Finance, The Wharton School "Bhansali's book demonstrates how tail risk hedging can work, be concretely implemented, and lead to higher returns so that it is possible to have your cake and eat it too! A must read for the savvy investor." -- DIDIER SORNETTE, Professor on the Chair of Entrepreneurial Risks, ETH Zurich

TAIL RISK HEDGING: Creating Robust Portfolios for Volatile Markets

TAIL RISK HEDGING: Creating Robust Portfolios for Volatile Markets PDF Author: Vineer Bhansali
Publisher: McGraw Hill Professional
ISBN: 0071791760
Category : Business & Economics
Languages : en
Pages : 272

Get Book Here

Book Description
"TAIL RISKS" originate from the failure of mean reversion and the idealized bell curve of asset returns, which assumes that highly probable outcomes occur near the center of the curve and that unlikely occurrences, good and bad, happen rarely, if at all, at either "tail" of the curve. Ever since the global financial crisis, protecting investments against these severe tail events has become a priority for investors and money managers, but it is something Vineer Bhansali and his team at PIMCO have been doing for over a decade. In one of the first comprehensive and rigorous books ever written on tail risk hedging, he lays out a systematic approach to protecting portfolios from, and potentially benefiting from, rare yet severe market outcomes. Tail Risk Hedging is built on the author's practical experience applying macroeconomic forecasting and quantitative modeling techniques across asset markets. Using empirical data and charts, he explains the consequences of diversification failure in tail events and how to manage portfolios when this happens. He provides an easy-to-use, yet rigorous framework for protecting investment portfolios against tail risk and using tail hedging to play offense. Tail Risk Hedging explores how to: Generate profits from volatility and illiquidity during tail-risk events in equity and credit markets Buy attractively priced tail hedges that add value to a portfolio and quantify basis risk Interpret the psychology of investors in option pricing and portfolio construction Customize explicit hedges for retirement investments Hedge risk factors such as duration risk and inflation risk Managing tail risk is today's most significant development in risk management, and this thorough guide helps you access every aspect of it. With the time-tested and mathematically rigorous strategies described here, including pieces of computer code, you get access to insights to help mitigate portfolio losses in significant downturns, create explosive liquidity while unhedged participants are forced to sell, and create more aggressive yet tail-risk-focused portfolios. The book also gives you a unique, higher level view of how tail risk is related to investing in alternatives, and of derivatives such as zerocost collars and variance swaps. Volatility and tail risks are here to stay, and so should your clients' wealth when you use Tail Risk Hedging for managing portfolios. PRAISE FOR TAIL RISK HEDGING: "Managing, mitigating, and even exploiting the risk of bad times are the most important concerns in investments. Bhansali puts tail risk hedging and tail risk management under a microscope--pricing, implementation, and showing how we can fine-tune our risk exposures, which are all crucial ways in how we can better weather our bad times." -- ANDREW ANG, Ann F. Kaplan Professor of Business at Columbia University "This book is critical and accessible reading for fiduciaries, financial consultants and investors interested in both theoretical foundations and practical considerations for how to frame hedging downside risk in portfolios. It is a tremendous resource for anyone involved in asset allocation today." -- CHRISTOPHER C. GECZY, Ph.D., Academic Director, Wharton Wealth Management Initiative and Adj. Associate Professor of Finance, The Wharton School "Bhansali's book demonstrates how tail risk hedging can work, be concretely implemented, and lead to higher returns so that it is possible to have your cake and eat it too! A must read for the savvy investor." -- DIDIER SORNETTE, Professor on the Chair of Entrepreneurial Risks, ETH Zurich

Tail Risk Hedging

Tail Risk Hedging PDF Author: Andrew Rozanov
Publisher:
ISBN: 9781782720805
Category : Business cycles
Languages : en
Pages : 304

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Book Description


Dynamic Hedging

Dynamic Hedging PDF Author: Nassim Nicholas Taleb
Publisher: John Wiley & Sons
ISBN: 9780471152804
Category : Business & Economics
Languages : en
Pages : 536

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Book Description
Destined to become a market classic, Dynamic Hedging is the only practical reference in exotic options hedgingand arbitrage for professional traders and money managers Watch the professionals. From central banks to brokerages to multinationals, institutional investors are flocking to a new generation of exotic and complex options contracts and derivatives. But the promise of ever larger profits also creates the potential for catastrophic trading losses. Now more than ever, the key to trading derivatives lies in implementing preventive risk management techniques that plan for and avoid these appalling downturns. Unlike other books that offer risk management for corporate treasurers, Dynamic Hedging targets the real-world needs of professional traders and money managers. Written by a leading options trader and derivatives risk advisor to global banks and exchanges, this book provides a practical, real-world methodology for monitoring and managing all the risks associated with portfolio management. Nassim Nicholas Taleb is the founder of Empirica Capital LLC, a hedge fund operator, and a fellow at the Courant Institute of Mathematical Sciences of New York University. He has held a variety of senior derivative trading positions in New York and London and worked as an independent floor trader in Chicago. Dr. Taleb was inducted in February 2001 in the Derivatives Strategy Hall of Fame. He received an MBA from the Wharton School and a Ph.D. from University Paris-Dauphine.

The Second Leg Down

The Second Leg Down PDF Author: Hari P. Krishnan
Publisher: John Wiley & Sons
ISBN: 1119219000
Category : Business & Economics
Languages : en
Pages : 285

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Book Description
Cut risk and generate profit even after the market drops The Second Leg Down offers practical approaches to profiting after a market event. Written by a specialist in global macro, volatility and hedging overlay strategies, this book provides in-depth insight into surviving in a volatile environment. Historical back tests and scenario diagrams illustrate a variety of strategies for offsetting portfolio risks with after-the-fact options hedging, and the discussion explores how a mixture of trend following and contrarian futures strategies can be beneficial. Without a rational analysis-based approach, investors often find themselves having to cut risk and buy protection just as options are at their most over-priced. This book provides practical strategies, expert analysis and the knowledge base to assist you in recovering your portfolio. Hedging strategies are often presented as expensive and unnecessary, especially during a bull market. When equity indices and other unstable assets drop, they find themselves stuck – hedging is now at its most expensive, but it is imperative to hedge or face liquidation. This book shows you how to salvage the situation, with strategies backed by expert analysis. Identify the right hedges during high volatility Generate attractive risk-adjusted returns Learn new strategies for offsetting risk Know your options for when losses have already occurred Imagine this scenario: you've incurred significant losses, you're approaching risk limits, you must cut risk immediately, yet slashing positions would damage the portfolio – what do you do? The Second Leg Down is your emergency hotline, with practical strategies for dire conditions.

Tail Risk Killers: How Math, Indeterminacy, and Hubris Distort Markets

Tail Risk Killers: How Math, Indeterminacy, and Hubris Distort Markets PDF Author: Jeffrey McGinn
Publisher: McGraw Hill Professional
ISBN: 0071784918
Category : Business & Economics
Languages : en
Pages : 385

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Book Description
Reshape your investing strategy for an increasingly uncertain world “An engrossing, fast-paced, terrific read for anyone interested in the financial imbalances due to too much reliance on math and too little respect for indeterminacy.” —Tyler Durden, ZeroHedge.com The world does not unfold according to a fixed set of rules. It is a dynamical system whose evolution looks like a bell curve with fat “tails.” The same is true of financial markets. However, every day we rely on the certainty and precision of mathematical strategies that assume the contrary to control and grow wealth in markets. Tail Risk Killers shows you how the rigidity of model-based thinking has led to the fragility of today’s global financial marketplace, and it explains how to use adaptive trading strategies to mitigate risk in impending market conditions. Risk management veteran Jeff McGinn pokes holes in prevalent assumptions about how financial markets act that tend to underestimate the likelihood of occurrence of extreme events. Through clear, conversational writing, real-world anecdotes, and easy-tofollow formulas, he provides a glimpse into the way tomorrow’s successful traders are viewing financial markets—with an eye for probability distributions. While illustrating how to protect your assets from tail risk, he shows you how to: Implement the six axioms for risk management Prepare for the unintended consequences of central banks suppressing tail risk Identify and avoid the dark risks hidden in today’s derivative-laden financial system Anticipate the fate of credit default swaps that may not face extinction McGinn argues that the intervention of central banks has robbed global markets of their opportunities to adapt, but this highly relevant book shows you that it is not too late to adapt your portfolio to survive the extreme events that happen more often than popular financial models suggest. Tail Risk Killers helps you discover useful information and processes beyond the focus of industry standards, helps you connect the dots of evolving trading strategies and time your next trade for maximum profitability.

The Dao of Capital

The Dao of Capital PDF Author: Mark Spitznagel
Publisher: John Wiley & Sons
ISBN: 1118416678
Category : Business & Economics
Languages : en
Pages : 375

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Book Description
As today's preeminent doomsday investor Mark Spitznagel describes his Daoist and roundabout investment approach, “one gains by losing and loses by gaining.” This is Austrian Investing, an archetypal, counterintuitive, and proven approach, gleaned from the 150-year-old Austrian School of economics, that is both timeless and exceedingly timely. In The Dao of Capital, hedge fund manager and tail-hedging pioneer Mark Spitznagel—with one of the top returns on capital of the financial crisis, as well as over a career—takes us on a gripping, circuitous journey from the Chicago trading pits, over the coniferous boreal forests and canonical strategists from Warring States China to Napoleonic Europe to burgeoning industrial America, to the great economic thinkers of late 19th century Austria. We arrive at his central investment methodology of Austrian Investing, where victory comes not from waging the immediate decisive battle, but rather from the roundabout approach of seeking the intermediate positional advantage (what he calls shi), of aiming at the indirect means rather than directly at the ends. The monumental challenge is in seeing time differently, in a whole new intertemporal dimension, one that is so contrary to our wiring. Spitznagel is the first to condense the theories of Ludwig von Mises and his Austrian School of economics into a cohesive and—as Spitznagel has shown—highly effective investment methodology. From identifying the monetary distortions and non-randomness of stock market routs (Spitznagel's bread and butter) to scorned highly-productive assets, in Ron Paul's words from the foreword, Spitznagel “brings Austrian economics from the ivory tower to the investment portfolio.” The Dao of Capital provides a rare and accessible look through the lens of one of today's great investors to discover a profound harmony with the market process—a harmony that is so essential today.

Market Tremors

Market Tremors PDF Author: Hari P. Krishnan
Publisher: Springer Nature
ISBN: 3030792536
Category : Business & Economics
Languages : en
Pages : 257

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Book Description
Since the Global Financial Crisis, the structure of financial markets has undergone a dramatic shift. Modern markets have been “zombified” by a combination of Central Bank policy, disintermediation of commercial banks through regulation, and the growth of passive products such as ETFs. Increasingly, risk builds up beneath the surface, through a combination of excessive leverage and crowded exposure to specific asset classes and strategies. In many cases, historical volatility understates prospective risk. This book provides a practical and wide ranging framework for dealing with the credit, positioning and liquidity risk that investors face in the modern age. The authors introduce concrete techniques for adjusting traditional risk measures such as volatility during this era of unprecedented balance sheet expansion. When certain agents in the financial network behave differently or in larger scale than they have in the past, traditional portfolio theory breaks down. It can no longer account for toxic feedback effects within the network. Our feedback-based risk adjustments allow investors to size their positions sensibly in dangerous set ups, where volatility is not providing an accurate barometer of true risk. The authors have drawn from the fields of statistical physics and game theory to simplify and quantify the impact of very large agents on the distribution of forward returns, and to offer techniques for dealing with situations where markets are structurally risky yet realized volatility is low. The concepts discussed here should be of practical interest to portfolio managers, asset allocators, and risk professionals, as well as of academic interest to scholars and theorists.

Safe Haven

Safe Haven PDF Author: Mark Spitznagel
Publisher: John Wiley & Sons
ISBN: 1394214855
Category : Business & Economics
Languages : en
Pages : 247

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Book Description
What is a safe haven? What role should they play in an investment portfolio? Do we use them only to seek shelter until the passing of financial storms? Or are they something more? Contrary to everything we know from modern financial theory, can higher returns actually come as a result of lowering risk? In Safe Haven, hedge fund manager Mark Spitznagel—one of the top practitioners of safe haven investing and portfolio risk mitigation in the world—answers these questions and more. Investors who heed the message in this book will never look at risk mitigation the same way again.

Managing Hedge Fund Risk and Financing

Managing Hedge Fund Risk and Financing PDF Author: David P. Belmont
Publisher: John Wiley & Sons
ISBN: 0470827262
Category : Business & Economics
Languages : en
Pages : 400

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Book Description
The ultimate guide to dealing with hedge fund risk in a post-Great Recession world Hedge funds have been faced with a variety of new challenges as a result of the ongoing financial crisis. The simultaneous collapse of major financial institutions that were their trading counterparties and service providers, fundamental and systemic increases in market volatility and illiquidity, and unrelenting demands from investors to redeem their hedge fund investments have conspired to make the climate for hedge funds extremely uncomfortable. As a result, many funds have failed or been forced to close due to poor performance. Managing Hedge Fund Risk and Financing: Adapting to a New Era brings together the many lessons learned from the recent crisis. Advising hedge fund managers and CFOs on how to manage the risk of their investment strategies and structure relationships to best insulate their firms and investors from the failures of financial counterparties, the book looks in detail at the various methodologies for managing hedge fund market, credit, and operational risks depending on the hedge fund's investment strategy. Also covering best practice ISDA, Prime Brokerage, Fee and Margin Lock Up, and including tips for Committed Facility lending contracts, the book includes everything you need to know to learn from the events of the past to inform your future hedge fund dealings. Shows how to manage hedge fund risk through the application of financial risk modelling and measurement techniques as well as the structuring of financial relationships with investors, regulators, creditors, and trading counterparties Written by a global finance expert, David Belmont, who worked closely with hedge fund clients during the crisis and experienced first hand what works Explains how to profit from the financial crisis In the wake of the Financial Crisis there have been calls for more stringent management of hedge fund risk, and this timely book offers comprehensive guidelines for CFOs looking to ensure world-class levels of corporate governance.

Bond Portfolio Investing and Risk Management

Bond Portfolio Investing and Risk Management PDF Author: Vineer Bhansali
Publisher: McGraw Hill Professional
ISBN: 0071713255
Category : Business & Economics
Languages : en
Pages : 321

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Book Description
Learn the fine art of risk measurement and control—from a senior member of PIMCO! Bond Portfolio Investing and Risk Management is designed for one purpose—to help you do the most important part of your job. A top player in the upper echelon of PIMCO, Vineer Bhansali understands the nuances and complexities of managing risk in fixed-income investing better than anyone. In this highly practical guide, he puts his years of experience and the latest research to work in order to help you contend with such issues as: Liquidity and stress risks Asset allocation Market anomalies Cross-market relationships Tail-risk measurement Cyclical returns Macroeconomic data Bond Portfolio Investing and Risk Management details the tools used to offset risk, including their advantages and drawbacks, and explains when to use each one. Bhansali provides practical investment techniques to give you a firm handle on the value and risk of a fixed-income instrument.