--Eleni Himaras
The move to central clearing could spark the long tail risk hedging market. A number of pension funds and endowments have become increasingly interested in hedging against extreme market moves, but are hesitant to do so in the over-the-counter space. Clearing the trades through a third party would allay those concerns, bankers and portfolio managers said.
Long tail risk refers to the tips of the bell curve that are more than two, or three -- depending on the professional -- standard deviations from the mean. It refers to events that have extremely low probability.
Tom Lee, a senior portfolio manager and principal at The Clifton Group investment management company ....