Fat tails

A distribution in which extreme outcomes occur more often than a normal (bell curve) distribution predicts. Financial returns are generally fat-tailed, so models that assume normality understate the chance of large moves.

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Related terms

Risk measures

• Active tail hedging
• Conditional value at risk
• Customer acquisition cost
• Long-tail risk
• Regulatory compliance
• Risk management
• Skewness
• Stress testing
• Tail-risk diversifiers
• Value at risk