Predicting equity volatility with return dispersion

Equity return dispersion is measured as the standard deviation of returns across different stocks or portfolios. Unlike volatility it can be measured even for...

U.S. dollar exchange rate before FOMC decisions

Since the mid-1990s the dollar exchange rate has mostly anticipated the outcome of FOMC meetings: it appreciated in the days before a rate hike...

Seasonal effects in commodity futures curves

Seasonal fluctuations are evident for many commodity prices. However, their exact size can be quite uncertain. Hence, seasons affect commodity futures curves in two...

Term premia and macro factors

The fixed income term premium is the difference between the yield of a longer-maturity bond and the average expected risk-free short-term rate for that...

VIX term structure as a trading signal

The VIX futures curve reflects expectations of future implied volatility of S&P500 index options. The slope of the curve is indicative of expected volatility...

FX carry strategies (part 1)

FX forward-implied carry is a valid basis for investment strategies because it is related to policy subsidies and risk premia. However, it also contains...

Using yield curve information for FX trading

FX carry trading strategies only use short-term interest rates (and forward basis) as signal. Yet both theoretical and empirical research suggests that the whole...

Fixed income carry as trading signal

Empirical evidence for 27 markets suggests that carry on interest rate swaps has been positively correlated with subsequent returns for the past two decades....

The correlation risk premium

The correlation risk premium is a premium for uncertainty of future correlation of securities among each other or with a benchmark. A rise in...

The passive investment boom and its consequences

Passive investment vehicles have been expanding rapidly over the past 10 years, with assets reaching about USD8 trillion or 20% of aggregate investment funds...

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How systemic financial risk is measured

Public institutions have developed a wide range of methods to track systemic financial risk. What most of them have in common is reliance on...

How convenience yields have compressed real interest rates

Real interest rates on ‘safe’ assets such as high-quality government bonds had been stationary around 2% for more than a century until the 1980s....

Variance term premia

Variance term premia are surcharges on traded volatility that compensate for bearing volatility risk in respect to underlying asset prices over different forward horizons....

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