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Dr. Benn Eifert - Bad Ideas (S3E3)
Flirting with Models
Is Tail Risk Pricing Just as Simple as Trying to Buy the Tail Risk When Volatility Levels Are Low?
Tail risk is what's the chance of the market being down 20 or 30% and that's going to be in options lingo more about skew at different points in the term structure. The price of tail risk was going down fairly dramatically in late February and early March, even as volatility was rising. And then the prices of tail risk kind of exploded mid March as you started to have 10% moves to the downside of the equity market. So right now, we're in a world where, depending on where you look, a lot of tail risk that was very cheap two months ago, I guess now it's three months ago is less cheap now.
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