Black Swan

AAA

DEFINITION of 'Black Swan'

An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult to predict. This term was popularized by Nassim Nicholas Taleb, a finance professor and former Wall Street trader.

INVESTOPEDIA EXPLAINS 'Black Swan'

Black swan events are typically random and unexpected. For example, the previously successful hedge fund Long Term Capital Management (LTCM) was driven into the ground as a result of the ripple effect caused by the Russian government's debt default. The Russian government's default represents a black swan event because none of LTCM's computer models could have predicted this event and its subsequent effects.

RELATED TERMS
  1. Anti-Fragility

    A postulated antithesis to fragility where high-impact events ...
  2. Hedge Fund

    An aggressively managed portfolio of investments that uses advanced ...
  3. Behavioral Finance

    A field of finance that proposes psychology-based theories to ...
  4. Long-Term Capital Management - ...

    A large hedge fund led by Nobel Prize-winning economists and ...
  5. Random Walk Theory

    The theory that stock price changes have the same distribution ...
  6. Wall Street

    1. A street in lower Manhattan that is the original home of the ...
RELATED FAQS
  1. Where did the bull and bear market get their names?

    First of all, let's remember that bears are sluggish and bulls spirited and burly. The terms are used to describe general ...
Related Articles
  1. Investing Basics

    Black Swan Events And Investment

    These world-changing events are rare and difficult to predict, but they have serious implications for your investments.
  2. Options & Futures

    Market Speculators: More Help Than Harm

    Speculators often get a bad rap, but it's important to remember that they only observe trends, not manipulate them.
  3. Options & Futures

    Massive Hedge Fund Failures

    Flying high one day but not the next - see the stories behind some spectacular meltdowns.
  4. Options & Futures

    A Brief History Of The Hedge Fund

    Find out how this U.S.-born investment innovation became a $1-trillion industry that's both praised and vilified by the media.
  5. Markets

    What Cuba-US Relations Could Mean For U.S. Industry

    The restoration of diplomatic relations with Cuba could mean big profits for U.S. travel, agriculture, and financial services sectors.
  6. Investing

    How to Use Stratified Random Sampling

    Stratified random sampling is a technique best used with a sample population easily broken into distinct subgroups. Samples are then taken from each subgroup based on the ratio of the subgroup’s ...
  7. Professionals

    What is a SWOT Analysis?

    SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. SWOT analysis is a management tool used to identify strategies for success. It may be used to guide individual thinking, group ...
  8. Investing Basics

    The Top Sites For The Latest Stock Market News

    News drives the markets for short term price movements. Which websites offer timely, accurate and reliable access to news for trading and investments?
  9. Fundamental Analysis

    Lognormal and Normal Distribution

    When and why do you use lognormal distribution or normal distribution for analyzing securities? Lognormal for stocks, normal for portfolio returns.
  10. Investing Basics

    Using Normal Distribution Formula To Optimize Your Portfolio

    Normal or bell curve distribution can be used in portfolio theory to help portfolio managers maximize return and minimize risk.

You May Also Like

Hot Definitions
  1. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  2. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  3. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
  4. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
  5. Law Of Supply

    A microeconomic law stating that, all other factors being equal, as the price of a good or service increases, the quantity ...
  6. Investment Grade

    A rating that indicates that a municipal or corporate bond has a relatively low risk of default. Bond rating firms, such ...
Trading Center