Asset Allocation & Risk

What is tail risk?

La versione italiana di questa pagina è in preparazione. Fino ad allora il testo è mostrato in inglese.

Tail risk is the risk of extreme events that are unlikely to occur but cause large losses when they do.

Many financial models assume that returns follow a normal distribution, but actual market returns tend to show 'fat tails', with extreme events occurring more often than such a distribution implies. Tail risk cannot be eliminated, but diversifying broadly across assets and strategies can soften the blow somewhat.

Last updated

This answer is general financial information as of 14/10/2026, not investment advice. Rules and tax rates change, so please also check the latest guidance from the source institution.