You’ve probably heard of a "black swan," thecatchphrasecoined from the 2007 book by author and investor Nassim Nicholas Taleb. A black swan for investors is essentially an outlier event that dramatically affects the economy and markets. For example, the 1998 Russian debt default that unexpectedly took down the Long Term Capital Management hedge fund and the 2008 global financial free fall when Lehman Brothers imploded.
It doesn’t take much imagination to see black swanslurkingthroughout the global economy. Europe’s crisis with the sovereign debt of the euro zone’s periphery nations threatens the health of major banks in the European Union. The fear ofcontagionfrom a European sovereign debt restructuring is strong, pushing up rates on Greek, Irish, Portuguese, Italian, and Spanish government loans. China on July 6 hiked itsbenchmarkinterest rate for the third time this year as the government attempts the difficultmaneuverof cooling down inflation without sending the economy into a hard landing. There’s the bitter talk in Washington by high-profile politicians welcoming the risk of default if a budget deal isn’t reached before an Aug. 2 debt ceiling deadline. Less immediate, but no less disturbing for investors, is the prospect of rising inflation in the U.S.
Nervous? You’re far from alone. "There is risk all over the place," says Campbell Harvey, a professor of international business at Duke’s Fuqua School of Business and a consultant to Man Group, one of the world’s largest managers of hedge funds. "This is the time to think about downside protection."
Question is, where to seek safety in coming months? The market for insurance products against catastrophe is exploding. Wall Street rocket scientists are busy coming up with anarrayof strategies and products—mostly based on fixed-income, equity, and currency derivatives—that offer "tail risk" protection. Fixed-income investors can buy credit default swap indexes on investment-grade issuers and high-yield debt.
Nakit Paranın Hazzı - The Joy of Cash
You’ve probably heard of a "black swan," thecatchphrasecoined from the 2007 book by author and investor Nassim Nicholas Taleb. A black swan for investors is essentially an outlier event that dramatically affects the economy and markets. For example, the 1998 Russian debt default that unexpectedly took down the Long Term Capital Management hedge fund and the 2008 global financial free fall when Lehman Brothers imploded.
It doesn’t take much imagination to see black swanslurkingthroughout the global economy. Europe’s crisis with the sovereign debt of the euro zone’s periphery nations threatens the health of major banks in the European Union. The fear ofcontagionfrom a European sovereign debt restructuring is strong, pushing up rates on Greek, Irish, Portuguese, Italian, and Spanish government loans. China on July 6 hiked itsbenchmarkinterest rate for the third time this year as the government attempts the difficultmaneuverof cooling down inflation without sending the economy into a hard landing. There’s the bitter talk in Washington by high-profile politicians welcoming the risk of default if a budget deal isn’t reached before an Aug. 2 debt ceiling deadline. Less immediate, but no less disturbing for investors, is the prospect of rising inflation in the U.S.
Nervous? You’re far from alone. "There is risk all over the place," says Campbell Harvey, a professor of international business at Duke’s Fuqua School of Business and a consultant to Man Group, one of the world’s largest managers of hedge funds. "This is the time to think about downside protection."
Question is, where to seek safety in coming months? The market for insurance products against catastrophe is exploding. Wall Street rocket scientists are busy coming up with anarrayof strategies and products—mostly based on fixed-income, equity, and currency derivatives—that offer "tail risk" protection. Fixed-income investors can buy credit default swap indexes on investment-grade issuers and high-yield debt.