Tail-risk management: an investor's perspective

Vineer Bhansali

Abstract

ABSTRACT

Investors take risks to deliver excess returns over their benchmarks. The most recent crisis in the financial markets has re-emphasized the need for practical principles to evaluate what risks are acceptable for long-term performance and which ones are better hedged out. This paper summarizes ten operational rules for tail-risk management of investment portfolios that investors ought to consider when constructing portfolios, especially those that have potential for impact from adverse credit events.