The downside variance risk premium

The variance risk premium of an asset is the difference between options-implied and actual expected return variation. It can be viewed as a price...

The 1×1 of risk perception measures

There are two reasons why macro traders watch risk perceptions. First, sudden spikes often trigger subsequent flows and macroeconomic change. Second, implausibly high or...

Monetary policy stance in one indicator

New research proposes to condense policy rates and balance sheet actions into a single implied short-term interest rate. To this end the term premium...

The consequences of increased financial collateralization

There has been a strong upward trend in collateralization since the great financial crisis. Suitable collateral, such as government bonds, is essential for financial...

Passive investment vehicles and price distortions

The share of passive investment vehicles in financial markets has soared over the past 20 years. In the U.S. equity market it has risen...

The predictability of relative asset returns

Empirical research suggests that it is easier to predict relative returns within an asset class than to predict absolute returns. Also, out-of-sample value generation...

Fixed income relative value

Relative value can be defined as expected price convergence of contracts or portfolios with similar risk profiles. For fixed income this means similar exposure...

How bank regulatory reform has changed macro trading

The great regulatory reform in global banking has altered the backdrop for macro trading. First, greater complexity and policymaker discretion means that investment managers...

How to use financial conditions indices

There are two ways to use financial conditions indicators for macro trading. First, the tightening of aggregate financial conditions helps forecasting macroeconomic dynamics and...

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...

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The downside variance risk premium

The variance risk premium of an asset is the difference between options-implied and actual expected return variation. It can be viewed as a price...

The 1×1 of risk perception measures

There are two reasons why macro traders watch risk perceptions. First, sudden spikes often trigger subsequent flows and macroeconomic change. Second, implausibly high or...

Monetary policy stance in one indicator

New research proposes to condense policy rates and balance sheet actions into a single implied short-term interest rate. To this end the term premium...

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