Gray Swan Event

A gray swan event is an unlikely event with severe consequences that can nonetheless be foreseen, because people know it could happen and may even have discussed it in advance. The term builds on the black swan event, popularized by the writer and former trader Nassim Nicholas Taleb in 2007 to describe shocks that are almost impossible to predict and are explained only after they occur. A gray swan sits between ordinary risk and a black swan: examples often cited include a major earthquake in a known fault zone, a large bank failure or a pandemic that experts had warned about. In crypto, a hack of a major exchange or a stablecoin losing its peg could be seen as gray swans. Because they are anticipated, firms can plan for them through hedging, reserves and stress testing. Also see volatility.