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 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. Investing

    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 actions and attitudes, or sentiment, either of an individual (bear and ...
  6. 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.
  7. Economics

    What's the relationship between r squared and beta?

    Learn about the relationship between R-squared and Beta. Explore how the concepts are related and often used in conjunction with portfolio Alpha.
  8. Economics

    What are some limitations of the consumer price index (CPI)?

    Explore some of the basic limitations of the widely used economic indicator, the consumer price index, or CPI, and examine the criticism of its accuracy.
  9. Economics

    Is the consumer price index (CPI) a cost of living index?

    Explore the consumer price index (CPI) and understand why it is not an actual cost of living index although it is often identified as one.
  10. Economics

    Where do funds report their r-squared?

    Learn where to find R-squared calculations for mutual funds. Explore R-squared, Alpha and Beta and how these calculations measure securities' performance.

You May Also Like

Hot Definitions
  1. Command Economy

    A system where the government, rather than the free market, determines what goods should be produced, how much should be ...
  2. Prospectus

    A formal legal document, which is required by and filed with the Securities and Exchange Commission, that provides details ...
  3. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest ...
  4. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  5. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  6. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
Trading Center