To give a brief counter to the Taleb/Spitznagel Empirica Kurtosis strategy, the pricing of deep out of the money options is systematically overvalued in relation to the Black-Scholes model, suggesting that the market correctly prices in fat tails.
The volatility smile pattern describes the 'overvalued' nature of these options, and the SKEW index tracks their pricing.
I wonder if this adjustment is enough... Spitznagel's fund did return 4,144% in Q1 2020. Maybe they found some other similar hole, but one seems to still exist.
It's certainly possible that even with the volatility smile markets still underprice unlikely events, but high returns from a tail-heding fund during a black swan event hardly provides any evidence. Regardless of pricing, the expectation of the strategy is infrequent high returns and frequent poor or negative returns. Whether the market accurately prices these events also depends on how bad returns are during years without anomalous market conditions, and the intervals between fat-tail events.
https://finance.yahoo.com/news/mark-spitznagel-univesa-cio-o...