3min chapter

Flirting with Models cover image

JD Gardner - "Win Bigger Than You Lose" (S1E5)

Flirting with Models

CHAPTER

The Tail Hedge Is Valuation Dependent

The tail hedge is actually valuation dependent. So if probabilities for greater drawdowns and lower returns moving forward, we probably want to have a tail hedge in place. When we are n the third or fourth cortile of cu ratio is the only time that the tail hedge will be included. The way i view tail hedging, yes, there's going to be some risk management benefits in a sharp drawdown. But also, what's going to happen as you're going to create cash at more opportune times to deploy capital into equities. I'd much rather demploy capital 20 % lower than i would to day.

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