4 ms·
That is true. However, he doesn't have to consciously think of himself as a tail risk fund for an investor to use him as an instrument. The investor has to be
by startupdiscuss 9y ago
That is true.
However, he doesn't have to consciously think of himself as a tail risk fund for an investor to use him as an instrument.
The investor has to believe that risk is mispriced. Paulson is just a mechanism for expressing a short view.
Why not just put it in an index fund? Because Paulson has access to different kinds of shorts (CDS, convincing banks to allow him to short housing and so on).
I have no answer for 18-20%. That is, as you pointed out, unsustainable.
- ithinkinstereo 9y agoHard to make bets via CDS these days given the central clearing (and thus collateral requirements) regulations in Dodd-Frank.
- inthewoods 9y agoSure, but tail risk funds are a specific "thing" - you're generally doing exactly what you described - selling out of the money puts on a constant basis in the event of a tail event, knowing you are going to lose that money 99% of the time. Betting on gold is certainly a bet like insurance, but it's not a tail risk. There's even an ETF for this now: TAIL
- sokoloff 9y agoI think you mean buying OoM puts, not selling them.
- inthewoods 9y agoYup - thanks for noting the typo!