The mighty “long-long” trade

One of the most successful investment strategies since the turn of the century has been the risk-parity “long-long” of combined equity, credit and duration...

The rise in risk spreads

A risk spread is a premium for bearing economic risk of an investment, paid over and above the short-term real interest rate. Over the...

Bad and good beta in FX strategies

Bad beta means market exposure that is expensive to hedge. Good beta is market exposure that is cheap to hedge. Distinguishing between these is...

Active fund risk premia in emerging markets

Security returns, adjusted for market risk, contain risk premia that compensate for the exposure to active fund risk. The active fund risk premium of...

Natural language processing for financial markets

News and comments are major drivers for asset prices, maybe more so than conventional price and economic data. Yet it is impossible for any...

A theory of hedge fund runs

Hedge funds’ capital structure is vulnerable to market shocks because most of them offer high liquidity to loss-sensitive investors. Moreover, hedge fund managers form...

Market noise

The term “market noise” refers to transactions that are erratic and unrelated to fundamental value. Theory suggests that without market noise profitable trading would...

U.S. Treasuries: decomposing the yield curve and predicting returns

A new paper proposes to decompose the U.S. government bond yield curve by applying a ‘bootstrapping method’ that resamples observed return differences across maturities....

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...

RECENT ARTICLES

The mighty “long-long” trade

One of the most successful investment strategies since the turn of the century has been the risk-parity “long-long” of combined equity, credit and duration...

The rise in risk spreads

A risk spread is a premium for bearing economic risk of an investment, paid over and above the short-term real interest rate. Over the...

Bad and good beta in FX strategies

Bad beta means market exposure that is expensive to hedge. Good beta is market exposure that is cheap to hedge. Distinguishing between these is...

POPULAR ARTICLES