CAT (VARC) PYQs

learning can change the rules that actors face. So, a rare shock can alter payoffs and raise the odds of subsequent large disturbances within the same system, which supports the idea of second-order tail events.

heavy-tailed events make extreme outcomes more frequent and larger than bell curve expectations. This complicates forecasting and risk management in collective settings shaped by contagion and copying behaviour.

examples like runs on banks and toilet paper scrambles illustrate how contagion can amplify local choices into system-wide cascades that surprise participants and lead to patterns they did not intend to create.

the text attributes the COVID-19 pandemic rebound in financial markets solely to displaced sports bettors and treats their entry as the overriding cause of the rapid recovery across assets and time horizons.