Tail Risk

Also known as: black swan, tail risk hedging

Tail risk is the danger from rare, extreme events — crashes and shocks in the far tails of the distribution. Humans underestimate it (treating “rare” as “impossible”), and real markets have fatter tails than models assume, so once-a-century crashes recur every decade. Respect it: never size or leverage so a plausible extreme can ruin you.