Word.ws English Dictionary

tail risk

tail risk noun: the probability that the value of something will fall more than three standard deviations (-3σ) below the mean; an extreme risk.

tail risk: the probability that the value of something will fall more than three standard deviations (-3σ)...
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Noun

tail risk (countable and uncountable, plural tail risks)

  1. The probability that the value of something will fall more than three standard deviations (-3σ) below the mean; an extreme risk.
    • The advantage of performing a simulation is that different tail risk measures can be computed from the simulated loss distribution.2004, Srichander Ramaswamy, Managing Credit Risk in Corporate Bond Portfolios, →ISBN, page 123
    • Hence, under tail risk, excess risk-shifting incentives of bank shareholders may exist almost independently of the level of initial or required capital.2011, International Monetary Fund, Capital Regulation and Tail Risk, →ISBN, page 4
    Synonyms:
    fat tail risk

Examples of tail risk in a sentence

  • Not making this distinction between normal risk and extreme tail risk is often the reason institutions lack clear, highly focused goals and governance policies for the management of tail risk.2013, Paul Karamjeet, Managing Extreme Financial Risk, →ISBN, page xxii:
  • Because really, if we can’t deal with catastrophic tail risk, then we do not have a legitimate government.2025 November 14, Kevin Roose, Casey Newton, quoting Dean Ball, “Data Centers in Space + A.I. Policy on the Right + A Gemini History...

Synonyms of tail risk

  • fat tail risk

Forms of tail risk

pluraltail risks
alternative formtail-risk

Origin of tail risk

From statistics, referring to the end-portion (“tail”) of distribution curves, in finance usually the left (“loss”) tail.

Questions about tail risk

What does tail risk mean?
Tail risk means the probability that the value of something will fall more than three standard deviations (-3σ) below the mean; an extreme risk.
How do you use tail risk in a sentence?
Not making this distinction between normal risk and extreme tail risk is often the reason institutions lack clear, highly focused goals and governance policies for the management of tail risk.
What part of speech is tail risk?
Tail risk is a noun.
What is the plural of tail risk?
The plural of tail risk is tail risks.

Words near tail risk in the dictionary

  1. tail recursion
  2. tail recursions
  3. tail recursive
  4. tail rhyme
  5. tail rhymes
  6. tail risk
  7. tail risks
  8. tail rotor
  9. tail rotors
  10. tail slate
  11. tail slates

Source and license

Adapted from Wiktionary: tail risk (page history and authors). Text available under the Creative Commons Attribution-ShareAlike 4.0 license. Word.ws reformatted the entry and added links. Wiktionary data of 2026-09-02.

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Cite this entry: “tail risk.” Word.ws, https://word.ws/tail_risk. Based on Wiktionary, CC BY-SA 4.0.