AI Snips
Chapters
Transcript
Episode notes
Long Vol As Sophisticated Insurance
- Long-vol is effectively sophisticated insurance: deep OTM options that usually lose small premiums but pay massively on extreme moves.
- The value comes from combining long convex tail bets with uncorrelated active strategies to limit long-term bleed.
Avoid Asymmetric Concave Risks
- Many funds offset convex tail bets by selling concave structures, which can blow up and negate convex returns during real crashes.
- Properly constructed long-vol funds avoid large asymmetric concave risks that destroy hedge mandates in stress.
Keep A Persistent Tail Allocation
- Keep a permanent, modest allocation to tail protection rather than trying to time crashes.
- Kris suggests roughly 10% of AUM in tail positions at once so a 50x tail can meaningfully lift total returns.