Black swan
What is it?
In the same way that black swans aren't exactly a common sight in most places in the world, a 'black swan' financial event is used to describe something that's a) not very probable, b) hard to predict, and c) outside normal expectations.
The term was applied to finance by Nassim Nicholas Taleb, a derivatives trader-cum-writer, who wrote a book about it in 2007.
Taleb says he got the idea from Europeans' surprise when they discovered black swans in Australia. Until then, their data had told them that all swans were white, so black ones were highly unexpected.
What's it got to do with the financial crisis?
Some people claim the credit crunch is a black swan event because no one expected it, nothing particularly similar had happened previously, and it couldn't have been predicted. Others say this is rubbish because it had been obvious that something was up for a while: not only were credit spreads ridiculously narrow before the crisis erupted in August 2007, but households around the world were dangerously indebted.
Last updated on 26 September 2008.
