Hedge fund investors get creative with tail hedges

Possible economic disaster has led to a proliferation of tail risk strategies giving investors more ways to protect against extreme events. A diversified approach to tail risk could yield best results.

Nassim Taleb, author of The Black Swan, often likens the fate of developed economies to an airplane with central bankers as the pilots. The central bankers crashed the plane in 2008, he says, but rather than replace the pilots, governments gave them a larger, more complicated plane to fly.

The pilots now have to execute a perfect landing in heavy fog on a tiny runway with the mountains of inflation on one side and an ocean of deflation on the other. It is no wonder investors strapped into the