#### SPECIAL: Commodities

### Commodity pricing

A new paper combines two key aspects of commodity pricing: a rational pricing model based on the present value of future convenience yields...

### The latent factors behind commodity price indices

A 35-year empirical study suggests that about one third of the monthly changes in a broad commodity price index can be attributed to a...

### Volatility risk premia in the commodity space

Volatility risk premia – differences between options-implied and actual volatility – are valid predictors for risky asset returns. High premia typically indicate high surcharges...

#### SYSTEMIC RISK

### How systemic financial risk is measured

Public institutions have developed a wide range of methods to track systemic financial risk. What...

### How convenience yields have compressed real interest rates

Real interest rates on ‘safe’ assets such as high-quality government bonds had been stationary around...

### How regulatory reform shapes the financial cycle

Ambitious regulatory reform has changed the dynamics of the global financial system. Capital ratios of...

### Predicting equity volatility with return dispersion

Equity return dispersion is measured as the standard deviation of returns across different stocks or...

### Low rates troubles for insurances and pension funds

A CGFS report highlights the pressure of a ‘low for long’ interest rate environment on...

#### SYSTEMATIC VALUE

### Variance term premia

Variance term premia are surcharges on traded volatility that compensate for bearing volatility risk in...

### Multiple risk-free interest rates

Financial markets produce more than one risk-free interest rate. This is because there are several...

### How lazy trading explains FX market puzzles

Not all market participants respond to changing conditions instantaneously, not even in the FX market....

### A brief history of quantitative equity strategies

Understanding quantitative equity investments means understanding a significant portion of market positions. Motivated by the...

### Predicting equity volatility with return dispersion

Equity return dispersion is measured as the standard deviation of returns across different stocks or...

#### POPULAR POSTS

### The four components of long-term bond yields

A BOJ paper proposes an affine terms structure model for bond yields under consideration of the zero lower bound. It estimates the contribution of...

### 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...

### Understanding market beta in FX

The beta of an investment measures its sensitivity to “market returns”. Unlike in equity, in FX the relevant benchmark for a beta cannot be a...

### Basic theory of momentum strategies

Systematic momentum trading is a major alternative risk premium strategy across asset classes. Time series momentum motivates trend following; cross section momentum gives rise...

### Lessons from long-term global equity performance

A truly global and long-term (116 years) data set for both successful and failed financial markets shows that equity has delivered positive long-term performance...

### Why the covered interest parity is breaking down

Deviations in the covered interest parity have become a regular phenomenon even in developed markets. Persistent gaps between on-shore and FX-implied interest rate differentials (“cross-currency...