SPECIAL: Bond yields
Analyzing global fixed income markets with tensors
Roughly speaking, a tensor is an array (generalization of a matrix) of numbers that transform according to certain rules when the array’s coordinates change....
The duration extraction effect
Under non-conventional monetary policy central banks influence financial markets through the “portfolio rebalancing channel”. The purchase of assets changes the structure of prices. A...
Understanding the correlation of equity and bond returns
The correlation of equity and high grade sovereign bond returns is a powerful driver of portfolio construction and the term premia of interest rates....
How convenience yields have compressed real interest rates
Real interest rates on ‘safe’ assets such as high-quality government bonds had been stationary around 2% for more than a century until the 1980s....
"Risk premia are defined as difference between implied volatility, skewness, and kurtosis and their realized moments. [We show] spillover effects of equity for commodities...of returns for risk premia...and of skewness premia for the returns." https://t.co/YYy6Y6vDAp 🇺🇦 https://t.co/GJfR9oBDWg
"Do You Really Know Your P&L? The Importance of Impact-Adjusting the P&L": "We...show that the difference between accounting and fundamental P&L, known as the trading footprint, can be significant in common trading scenarios." https://t.co/P7ZqMaQzlN 🇺🇦 https://t.co/WZD2GXgFwx
Fiscal policy criteria for fixed-income allocation:
Evidence from 20 countries over 20 years shows that indicators of fiscal stances have been timely, theoretically plausible, and profitable criteria for fixed-income allocations across currency areas.
https://t.co/Bq5HfweDua 🇺🇦 https://t.co/t8OtpIRumx
Evidence from 20 countries over 20 years shows that indicators of fiscal stances have been timely, theoretically plausible, and profitable criteria for fixed-income allocations across currency areas.
https://t.co/Bq5HfweDua 🇺🇦 https://t.co/t8OtpIRumx
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asset management Asset Purchase Program banks bond returns bond yields bubbles capital regulation China collateral commodities credit returns default ECB economic data EM equity returns euro area crisis Fed financial crisis FX FX interventions FX returns government debt government deficits herding inflation information leverage liquidity market turmoil price factors regulation risk management shadow banking statistical methods term structure trend following variance risk premium volatility ZLB
SYSTEMIC RISK
Crashes in safe asset markets
A new theoretical paper illustrates the logic behind runs and crashes in modern safe asset...
Copulas and trading strategies
Reliance on linear correlation coefficients and joint normal distribution of returns in multi-asset trading strategies...
How to manage systemic risk in asset management
Systemic crises are rare but critical for long-term performance records. When the financial system fails,...
Classifying market regimes
Market regimes are clusters of persistent market conditions. They affect the relevance of investment factors...
How to construct a bond volatility index and extract market information
Volatility indices, based upon the methodology of the Cboe volatility index (VIX), serve as measures...
SYSTEMATIC VALUE
Fiscal policy criteria for fixed-income allocation
The fiscal stance of governments can be a powerful force in local fixed-income markets. On...
Detecting trends and mean reversion with the Hurst exponent
The Hurst exponent is a statistical measure of long-term memory of time series. The existence...
Modified and balanced FX carry
There are two simple ways to enhance FX carry strategies with economic information. The first...
FX trades after volatility shocks
Currency areas with negative external balances are – all other things equal – more vulnerable...
Identifying the drivers of the commodity market
Commodity futures returns are correlated across many different raw materials and products. Research has identified...
POPULAR POSTS
The dangerous disregard for fat tails in quantitative finance
The statistical term ‘fat tails’ refers to probability distributions with relatively high probability of extreme outcomes. Fat tails also imply strong influence of extreme...
Understanding dollar cross-currency basis
Covered interest parity is an arbitrage condition that equalizes costs of direct USD funding and of synthetic USD funding through FX swaps. Deviations are...
VIX term structure as a trading signal
The VIX futures curve reflects expectations of future implied volatility of S&P500 index options. The slope of the curve is indicative of expected volatility...
The importance of volatility of volatility
Options-implied volatility of U.S. equity prices is measured by the volatility index, VIX. Options-implied volatility of volatility is measured by the volatility-of-volatility index, VVIX....
Understanding the correlation of equity and bond returns
The correlation of equity and high grade sovereign bond returns is a powerful driver of portfolio construction and the term premia of interest rates....
Leverage in asset management
Asset managers can use leverage to enhance returns. Outside hedge funds, such leverage is modest as share of assets under management. However, considering the huge...