Fragility in the Fourth Quadrant can be re-expressed as “concavity to errors,” where losses from uncertain events vastly exceed possible profits from it over short horizons. One class of investment strate- gies that typically have this property are so-called “short volatility” trading strategies or positions (. such as naked put-writing), which are often manifest in “carry trades.” These exposures increased sig- nificantly with concentration of positions in and across banks and other financial institutions as these organizations tended to find themselves attracted to similar strategies that had an apparent “his- tory” of profitability without much realized risk/volatility. As more and more organizations found.
