Special to AllAboutAlpha.com by: Alexander Ineichen, CFA, CAIA

A Green Pig Down Wall Street – Act I

Once upon a time, not so long ago, there was a bear named Winnie-the-Bear who lived in the Trillion Acre Wood. On some level, he was a silly old bear. Nevertheless, he was wondering what the fuss about hedge funds was all about. He invited his two best friends, George Jones, the famous hedge fund manager, and Ben Put, the famous academic central banker, to the Trillion Acre Wood for a chat on hedge funds.

Winnie-the-Bear: Thank you for joining me for a new adventure. The financial crisis was a major disaster. Didn’t anyone see it coming?
George Jones: Very few did. The financial meltdown was a so-called Green Pig event. These things are impossible or at least very difficult to predict.
Winnie-the-Bear: What’s a Green Pig event?
George Jones: It’s financial jargon for an event that is highly improbable to occur but has a major impact on everyone if it actually does occur. It’s from a famous book called The Green Pig – The improbable impact of the randomly fooled.

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