We false assume that after year of high speculation and bubbles as the financial crisis 2008, that the regulatory framework establishes save distinctive post bubble financial market. Participants might have the hopes that financial market have “learned their lessons”, we all and in particular institutional participants doing all it takes to prevent the next financial crisis.

But we have to realise the contrary is closer to the truth than our optimistic. More and more investors belief that stock markets will continue their growth journey of 11,3% average geometric returns over the last 10 years.  Sophisticated investing entails to consider what is not happened in the past but still possible for the future:

Fat tails are part of the return distribution of equity returns. Dealing with tail risk is mandatory for sophisticated equity trading. Tail risk is the fire insurance of the house, an insurance we cannot afford to neglect (Spitznagel and Taleb, 2021). It is the main concern of banking supervision, because it has the magnitude to stop the debt and credit cycle in the financial economy (Dalio, 2022). It is is crucial for monetary policy because it is the main threat to financial stability.

“History Doesn’t Repeat Itself, but It Often Rhymes” – Mark Twain.