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This presentation explores the analysis of fat-tailed behaviour, what causes fat-tailed behaviour (including time-variation, crowded trades and selection effects) and portfolio construction in the presence of fat tails. It is based on material in the author’s book ‘Extreme Events: Robust Portfolio Construction in the Presence of Fat Tails’.

Slides

1	Extreme Events: Robust Portfolio Construction in the Presence of Fat Tails
2	Agenda
3	Analysing fat-tailed behaviour
4	Skew(ness), kurtosis and Cornish Fisher
5	Joint fat-tailed behaviour
6	What causes fat-tailed behaviour?
7	Time-varying volatility
8	Explains some market index fat tails, particularly on upside
9	A longer term phenomenon too
10	Crowded trades and selection effects
11	Portfolio construction
12	Portfolio construction - sensitivities
13	Incorporating fat tails - Solution A - simplest
14	Incorporating fat tails - Solution B - more sophisticated
15	Summary
16	Appendix A: Flaws in Cornish Fisher (and skew/kurtosis
17	Appendix B: Selection effects
18	Selection effects are potentially very important
19	Selection - does it occur in practice?
20	Important Information

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