A Black Swan event is a highly improbable, unpredictable occurrence that has an extreme and widespread impact on financial markets or economies, and is typically rationalised in hindsight as if it should have been foreseeable. The term was popularised by author and statistician Nassim Nicholas Taleb. Examples include the 2008 global financial crisis, the COVID-19 pandemic-driven market crash of March 2020, and the 9/11 attacks. For investors, Black Swan events serve as a reminder that tail risks—however unlikely—must be accounted for in portfolio construction through diversification, options hedging, and maintaining adequate liquidity buffers to avoid being forced to sell assets at distressed prices during extreme market dislocations.
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