The financial crisis vividly taught investors the importance of tail risk, a massive one-off event that can crush the value of portfolios. As the dust settles, fear of another “tail” to sting portfolios is uppermost in the minds of many investors and money managers.
The looming threat animating some investors, such as macro hedge funds, and creating waves in the interest rate options market, is the risk that the huge liquidity injections being made by central banks could spark a surge in either inflation and/or long-term interest rates beyond 2012.
