fat tail
The term "fat tail" is used in statistics and finance to describe distributions with a higher likelihood of extreme events compared to a normal distribution.
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Definition
C1Statistics
(technical, academic)A probability distribution with a higher likelihood of extreme outcomes than a normal distribution, indicated by thicker tails.
Example
- In a fat tail distribution, extreme values are more common than in a normal distribution.
- Researchers found that the data exhibited a fat tail, indicating a higher chance of outliers.
C1Finance
(technical)The increased probability of rare and significant events in asset returns, deviating from normal distribution predictions.
Example
- Investors need to consider fat tails when assessing the risk of extreme market movements.
- The financial crisis was an example of a fat tail event that caught many by surprise.
C1Risk Management
(technical)Greater-than-expected risk of extreme losses, requiring more robust strategies to mitigate potential impacts.
Example
- Risk managers develop strategies to protect against fat tail risks.
- The company implemented measures to guard against fat tail events that could lead to substantial losses.
Similar
Terms that have similar or relatively close meanings to "fat tail":