1. Tail Dependence Fat Tails Micro Correlations Tail Dependence “When sorrows come, they come…in battalions.” King Claudius, Hamlet Prince of Denmark, Act 4 Scene 5 Cooke and Kousky nsf# 0960865 http://www.rff.org/Events/Pages/Introductio n-Climate-Change-Extreme-Events.aspx

3. Here’s what killed your 401(k)

4. Tail dependence: Correlations are in the High (or low) values

5. Two loss variables independent dependent (0.1) 401K killer

6. Copula independent dependent (0.1) 401K killer

7. Sums of 40 loss variables independent dependent 401K killer

8. Copula: sums of 40 independent 401K killer

9. Sums of 40 401K killer Tail dependent

10. Copula: sums of 40 401K killer tail dependent

13. Tail dependence Bad things happen together “ fatally flawed way to assess risk”

14. Tail Dependence: Ignore it at your 401K’s peril Fat Tails Micro Correlations The Unholy Trinity: http://www.rff.org/Publications/Pages/PublicationDetails.aspx?PublicationID=20949