How central banks can take nominal rates deeply negative

The popular view that nominal interest rates have a natural zero lower bound has become obsolete in modern financial systems. It may be more...

Systematic trading strategies: fooled by live records

Allocators to systematic strategies usually trust live records far more than backtests. Given the moral hazard issues of backtesting in the financial industry, this...

Bayesian Risk Forecasting

Portfolio risk forecasting is subject to great parameter uncertainty, particularly for longer forward horizons. This simply reflects that large drawdowns are observed only rarely,...

The implicit subsidies behind simple trading rules

Implicit subsidies are premia paid by large financial markets participants for reasons other than risk-return optimization (view post here). Their estimation requires skill and...

Implicit subsidies paid in financial markets: updated primer

Implicit subsidies in financial markets are premia paid through transactions that have motives other than conventional risk-return optimization. They manifest as expected returns over...

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...

Tiered reserve systems

Negative monetary policy rates can undermine financial transmission, because they encourage cash hoarding and reduce the profitability of traditional banking. This danger increases with...

Survival in the trading factor zoo

The algorithmic strategy business likes quoting academic research to support specific trading factors, particularly in the equity space. Unfortunately, the rules of conventional academic...

Signaling systemic risk

Systemic financial crises arise when vulnerable financial systems meet adverse shocks. A systemic risk indicator tracks the vulnerability rather than the shocks (which are...

How to estimate risk in extreme market situations

Estimating portfolio risk in extreme situations means answering two questions: First, has the market entered an extreme state? Second, how are returns likely to...

RECENT ARTICLES

How central banks can take nominal rates deeply negative

The popular view that nominal interest rates have a natural zero lower bound has become obsolete in modern financial systems. It may be more...

Systematic trading strategies: fooled by live records

Allocators to systematic strategies usually trust live records far more than backtests. Given the moral hazard issues of backtesting in the financial industry, this...

Bayesian Risk Forecasting

Portfolio risk forecasting is subject to great parameter uncertainty, particularly for longer forward horizons. This simply reflects that large drawdowns are observed only rarely,...

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