This Measure of the Market's Expectations for an Extreme Event, Tail Event, or Black Swan, Indicates Complacent Investors

As investment risk managers, measuring risk involves many dimensions of risk of loss. Volatility indexes, for example, provide us with valuable insight into  investors’ expectations to big moves up or down.  

Nations TailDex® is at a low over the past year, suggesting complacency.

TailDex® is a measure of the market’s expectations for an extreme event, often called a “tail event” or a “black swan,” which is a drop of at least three standard deviations.

TailDex® calculates the cost of protecting against a drop of at three standard deviations, providing insight into investors’ expectations.

 TailDex® uses instantaneous implied volatility to calculate standard deviation of returns, so it responds to current market conditions rather than relying on historical data.

For more information, or for investment management of advice for hedging your portfolio, contact us.