Fear of drawdown

Experimental research suggests that probability of outright loss rather than volatility is the key driver of investor risk perceptions. Moreover, fear of drawdown causes...

Covered interest parity: breakdowns and opportunities

Since the great financial crisis conventional measures of the covered interest parity across currencies have regularly broken down. Two developments seem to explain this....

The demographic compression of interest rates

Declining population growth and rising dependency ratios in the developed world have been one key factor behind the decline in nominal and real interest...

Predicting asset price correlation for dynamic hedging

Dynamic hedging requires prediction of correlations and “betas” across asset classes and contracts. A new paper on dynamic currency hedging proposes two enhancements of...

Global market portfolio: construction and performance

A representative market portfolio can be built as the capitalization-weighted average of global equity, real estate and bonds. From 1960 to 2015 such a...

Cross-asset carry: an introduction

Carry can be defined as return for unchanged market prices and is easy to calculate in real time across assets. Carry strategies often reap...

Explaining FX forward bias

Forward bias in foreign exchange markets means that a positive interest rate differential precedes currency appreciation. It has been an empirical regularity in developed...

What traders can learn from market price volatility

Equity and bond market volatility can be decomposed into persistent and transitory components by means of statistical methods. The distinction is relevant for macro...

Why financial markets misprice fundamental value

Experimental research has produced robust evidence for mispricing of assets relative to their fundamental values even with active trading and sufficient information. Academic studies...

FX strategies based on quanto contract information

Quantos are derivatives that settle in currencies different from the denomination of the underlying contract. Therefore, quanto index contracts for the S&P 500 provide...

RECENT ARTICLES

Fear of drawdown

Experimental research suggests that probability of outright loss rather than volatility is the key driver of investor risk perceptions. Moreover, fear of drawdown causes...

Covered interest parity: breakdowns and opportunities

Since the great financial crisis conventional measures of the covered interest parity across currencies have regularly broken down. Two developments seem to explain this....

The demographic compression of interest rates

Declining population growth and rising dependency ratios in the developed world have been one key factor behind the decline in nominal and real interest...

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