Since the global financial crisis, investors have been faced with the difficult question of how to generate returns in a more uncertain and volatile environment while controlling the potential downside. Traditional risk control methods such as diversification have been shown to have limits and as a result tail risk hedging has emerged as one possible answer, with several investment managers reporting the tail risk hedging business to be their fastest area of asset growth in the wake of the crisis.
This is the first ever edited volume on tail risk hedging, which can serve as a primer and an authoritative guide for institutional investors. Edited by leading experts in the area Andrew Rozanov and Ryan McRandal, based at Permal and Peters Capital Group respectively, the book brings together a representative cross-section of views from practitioners who are active in the space. Chapters include:
- An Introduction to Tail Risk Hedging
- Strategic Tail Risk Management: a Pension Fund’s Perspective
- An Asset Allocator’s Approach to Tail Risk Hedging
- A Systematic Approach to Tail Risk Hedging
- Book - 9781782720805 / eBook - 9781782721833
- Publish date
- 17 Jul 2014
- 155mm x 235mm
Table of contents
1. An Introduction to Tail Risk Hedging
Andrew Rozanov; Ryan McRandal
Permal Group; Peters Capital Group
2. Tail Risk Hedging: An Investment Consultant’s Perspective
3. Strategic Tail Risk Management: A Pension Fund’s Perspective
4. An Asset Allocator’s Approach to Tail Risk Hedging
Spartus Capital Management
5. Dealing with Wrong-way Risk: A University Endowment’s Perspective
The University of Chicago
6. A Multi-Strategy Approach to Tail Risk Hedging
Peters Capital Group
7. A Discretionary Approach to Tail Risk Hedging
Capula Investment Management
8. Insuring Against Hidden Financial Catastrophe Risk
Josh Davis and Vineer Bhansali
9. Benchmarking Convexity: Towards a Holistic Approach
Anthony Limbrick and Siva Naguleswaran
36 South Capital Advisors LLP
10. Using Equity Options and Volatility to Manage Tail Risk
Capstone Investment Advisors
11. A Systematic Approach to Tail Risk Hedging
Jean-François Bacmann and Sandy Rattray
12. Tail Risk Hedging Using Convertibles
13. Sourcing Convexity in Asian Markets
"The definitive source for any investor considering tail hedging. The expertise of writers (and editors!) shines through in every chapter. By showcasing the institutional users' frameworks to assess the role of tail hedging in their portfolios as well as a range of diverse solutions offered by major tail hedge providers, the book gives a comprehensive picture of the menu of possibilities, with pros and cons on each."
Antti Ilmanen, Principal at AQR Capital Management and author of 'Expected Returns'.
"Tail Risk Hedging is as important as it is timely. As yields and spreads in developed markets touch all-time lows and volatility across asset classes is crushed under the weight of global central bank intervention, it is all-too easy for investors to overlook the risks building quietly around them. With contributions from many of the industry's most thoughtful tail risk practitioners, Rozanov and McRandal have compiled an insightful and well rounded book that may turn out to be the most important addition to your investment library this year and next."
Luke Dixon, Co-Head of Public Market Manager Selection at USS Investment Management.
“Rozanov and McRandal have assembled a preeminent cast of experts to tackle the hugely important challenge of tail risk hedging. Their introductory chapter offers a concise, but hardly superficial, overview of the topic, which is followed by a series of targeted analyses from the perspectives of both asset owners and managers. Anyone who worries about large drawdowns should keep this book close at hand.”
Mark Kritzman, President and CEO of Windham Capital Management and Senior Lecturer at MIT Sloan
"Avoiding the disastrous consequences of extreme left tail events is critical to successful asset management. The range of approaches to hedging tail risk, however, is limitless. The benefits of each competing approach must be carefully weighed against the costs. The chapters of this book provide a strong sense for what the important risks are and how they may be managed. Each is written by a risk management expert, and, collectively, the contributors share the practical wisdom and knowledge that comes from several centuries of risk management experience. Rozanov and McRandal are to be commended for their efforts in enriching our understanding of the practice of risk management."
Robert E. Whaley, Valere Blair Potter Professor of Finance and Director of the Financial Markets Research Center, Vanderbilt University, and the creator of the VIX.
“The discussion of tail risk is essential to contextualising the true risks that investors face. Tail Risk Hedging pulls together valuable perspectives and insights from leading practitioners. In doing so, the book creates what is at once a primer, and a manual, for risk management professionals.”
Leo Svoboda, Portfolio Manager, UPS Investments Group