Episode 9: Liquidity Crashes
Lesson summary:
The lesson discusses the significance of liquidity crashes and the need for strategies designed to perform well during such crises. The hosts highlight the limitations of diversification and traditional risk management approaches, emphasizing the importance of incorporating tailored strategies triggered by liquidity shocks. The episode also explores the value of long volatility trades and their potential to generate excess returns and acquire distressed assets. The hosts stress the importance of diversifying tail protection strategies within a portfolio and draw parallels to basketball player Dennis Rodman’s impact on a team. The episode concludes by emphasizing the importance of balancing income requirements with consistent long-term returns.