SPECIAL: Commodities
Forecasting energy markets with macro data
Recent academic papers illustrate how macroeconomic data support predictions of energy market flows and prices. Valid macro indicators include shipping costs, industrial production measures,...
Commodity carry
Across assets, carry is defined as return for unchanged prices and is calculated based on the difference between spot and futures prices (view post...
Seasonal effects in commodity futures curves
Seasonal fluctuations are evident for many commodity prices. However, their exact size can be quite uncertain. Hence, seasons affect commodity futures curves in two...
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...
"We examine options listed on sector ETFs...and find...predictability in implied volatilities associated with abnormally high or low implied correlations...Sector and S&P 500 correlation premiums...[form] the basis for profitable trading signals." https://t.co/DGN21GZNs6 https://t.co/HdWgJ2xorn
"Delta-hedged equity option returns include a volatility risk premium...Using conditional quantile curves of implied volatilities helps [measuring] volatility risk premia [and] leads to returns that are higher than...similar volatility strategies." https://t.co/d06lOpp8vc https://t.co/LyvuY9HFxv
"Statistical arbitrage identifies and exploits temporal price differences between similar assets. We propose a unifying conceptual framework and develop a novel deep learning solution, which finds commonality and time-series patterns from large panels." https://t.co/Aat2irjgFl https://t.co/71hohG1X0a
TAGS
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
Market dynamics: belief, risk, and ambiguity effects
To understand financial market dynamics, it is helpful to distinguish beliefs, attitudes towards risk, and...
Building a real-time market distress index
A new Fed paper explains how to construct a real-time distress index, using the case...
The financial stability interest rate
The financial stability interest rate is a threshold above which the real interest rate in...
Contagion and self-fulfilling dynamics
Contagion and self-fulfilling feedback loops are propagation mechanisms at the heart of systemic financial crises....
Macro uncertainty as predictor of market volatility
Market volatility measures the size of variations of asset returns. Macroeconomic uncertainty measures the size...
SYSTEMATIC VALUE
Markets’ neglect of macro news
Empirical evidence suggests that investors pay less attention to macroeconomic news when market sentiment is...
Factor momentum: a brief introduction
Standard equity factors are autocorrelated. Hence, it is not surprising that factor strategies have also...
The macro forces behind equity-bond price correlation
Since the late 1990s, the negative price correlation of equity and high-grade bonds has reduced...
Macro information waste and the quantamental solution
Financial markets are not macro information efficient. This means that investment decisions miss out on...
Statistical arbitrage risk premium
Any asset can use a portfolio of similar assets to hedge against its factor exposure....
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...
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....
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....
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...