Tail Risk
Tail risk is an informal term used in risk management to refer to negative outcomes with a low probability. The term is derived from the informal use of “tails” in statistics to refer to both the extreme negative and positive regions of a probability density function.
As an example, a risk manager might say, “The tail risk in this portfolio is that interest rates decrease significantly. It is unlikely to happen, but, if it does, it would like mean large losses for the portfolio.”