# Tail risk parity

Tail risk parity is an extension of the risk parity concept that takes into account the behavior of the portfolio components during tail risk events.wikipedia

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### Risk parity

**Risk premia parity**

Tail risk parity is an extension of the risk parity concept that takes into account the behavior of the portfolio components during tail risk events.

Tail risk parity

### Tail risk

Tail risk parity is an extension of the risk parity concept that takes into account the behavior of the portfolio components during tail risk events.

Tail risk parity

### Holy grail distribution

Holy grail distribution

Protection of a diversified investment portfolio from market crashes (extreme events) can be achieved by using a tail risk parity approach, allocating a piece of the portfolio to a tail risk protection strategy, or to a strategy with Holy grail distribution of returns.

### Portfolio (finance)

**portfolioinvestment portfolioportfolios**

Tail risk parity is an extension of the risk parity concept that takes into account the behavior of the portfolio components during tail risk events.

### Financial crisis

**economic crisisfinancial criseseconomic crises**

The goal of the tail risk parity approach is to protect investment portfolios at the times of economic crises and reduce the cost of such protection during normal market conditions.

### Expected shortfall

**average value at riskconditional value at riskExpected tail loss**

In the tail risk parity framework risk is defined as expected tail loss.

### Correlation and dependence

**correlationcorrelatedcorrelate**

Traditional portfolio diversification relies on the correlations among assets and among asset classes, but these correlations are not constant.

### Asset classes

**asset class**

Because correlations among assets and asset classes increase during tail risk events and can go to 100%, TRP divides asset classes into buckets that behave differently under market stress conditions, while assets in each bucket behave similarly.

### Drawdown (economics)

**drawdowndrawdownsmaximum drawdown**

During tail risk events asset prices can fall significantly creating deep portfolio drawdowns.

### Diversification (finance)

**diversificationdiversifieddiversify**

Traditional portfolio diversification relies on the correlations among assets and among asset classes, but these correlations are not constant.

### Financial risk

**riskinvestment riskfinancial**

Financial risk

### Hedge fund

**hedge fundshedge fund managerhedge-fund**

Hedge fund

### Black swan theory

**black swanblack swansblack swan event**

Black swan theory

### Outline of finance

**List of valuation topicsFinanceList of insurance topics**

Tail risk parity