How to estimate factor exposure, risk premia, and discount factors

The basic idea behind factor models is that a large range of assets’ returns can be explained by exposure to a small range of...

Variance risk premia for patient investors

The variance risk premium manifests as a long-term difference between option-implied and expected realized asset price volatility. It compensates investors for taking short volatility...

Classifying market regimes

Market regimes are clusters of persistent market conditions. They affect the relevance of investment factors and the success of trading strategies. The practical challenge...

The risk-reversal premium

The risk reversal premium manifests as an overpricing of out-of-the-money put options relative to out-of-the-money call options with equal expiration dates. The premium apparently...

How to construct a bond volatility index and extract market information

Volatility indices, based upon the methodology of the Cboe volatility index (VIX), serve as measures of near-term market uncertainty across asset classes. They are...

Fundamental value strategies

Value opportunities arise when market prices deviate from contracts’ present values of all associated entitlements or obligations. However, this theoretical concept is difficult and...

Equity factor timing with macro trends

Plausibility and empirical evidence suggest that the prices of equity factor portfolios are anchored by the macroeconomy in the long run. A new paper...

Measuring the value-added of algorithmic trading strategies

Standard performance statistics are insufficient and potentially misleading for evaluating algorithmic trading strategies. Metrics based on prediction errors mistakenly assume that all errors matter...

The emotion beta of stocks

Stock markets cater to both the financial and emotional needs of investors. In particular, integral emotions, which are caused by decisions themselves, are useful...

Risk premia in energy futures markets

Energy futures markets allow transferring risk from producers or consumers to financial investors. According to the hedging pressure hypothesis, net shorts of industrial producers...

RECENT ARTICLES

How to estimate factor exposure, risk premia, and discount factors

The basic idea behind factor models is that a large range of assets’ returns can be explained by exposure to a small range of...

Variance risk premia for patient investors

The variance risk premium manifests as a long-term difference between option-implied and expected realized asset price volatility. It compensates investors for taking short volatility...

Classifying market regimes

Market regimes are clusters of persistent market conditions. They affect the relevance of investment factors and the success of trading strategies. The practical challenge...

POPULAR ARTICLES