Stacking, Diversifiers and Responders
A neat thought experiment: 100% ACWI, 50% trend following and a 100% notional tail hedge. Here I summarise the paper, explain the tail risk hedging strategy of buying one-year 10-delta SPX puts, critique the assumptions, and show why convexity and net risky asset exposure matter. I also cover practical challenges of accessing SPX tail hedges in a UCITS world.