Tail risk
Risk & psychologyThe risk of a rare, very large loss well outside normal expectations.
In plain terms
What mean reversion trades away its high win rate for. The one position that never comes back is the whole risk in that style.
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Glossary
Every term is defined twice: once the way a filing would put it, and once the way somebody would explain it to you across a table. The second one is usually the one that sticks.
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Sharpe ratio
Risk & psychologyReturn per unit of volatility.
In plain terms
Penalises upside volatility equally and flatters strategies that quietly sell tail risk.