Asymmetric Risk - Examples

Real-World Examples

1. Option-like Payoffs

• Long dated puts (crisis insurance)
• Early-stage equity (limited downside, huge upside)

2. Distressed Debt

• Buying bonds at deep discounts (downside is limited to what you pay)
• Upside is par value + yield

3. Catastrophe Insurance

• Berkshire's insurance business
• Premiums collected (upside)
• Catastrophe losses (defined downside)

4. Concentrated Quality

• Buying wonderful businesses at fair prices
• Permanent loss unlikely
• Upside is business comp

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