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...

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....

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...

Commodity carry

Across assets, carry is defined as return for unchanged prices and is calculated based on the difference between spot and futures prices (view post...

Commodity pricing

A new paper combines two key aspects of commodity pricing: a rational pricing model based on the present value of future convenience yields...

Realistic volatility risk premia

The volatility risk premium compensates investors for taking volatility risk. Conceptually it is based on the difference between options-implied and expected realized volatility. In...

FX carry strategies (part 2): Hedging

There is often a strong case for hedging FX carry trades against unrelated global market factors. It is usually not difficult to hedge currency...

The price effects of order flow

Order flow means buyer- or seller-initiated transactions at electronic exchanges. Order flow consumes liquidity provided by market makers and drives a wedge between transacted...

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...

How salience theory explains the mispricing of risk

Salience theory suggests that decision makers exaggerate the probability of extreme events if they are aware of their possibility. This gives rise to subjective...

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