Japan’s yield curve control: the basics

The Bank of Japan has once again broken new grounds in monetary policy, now targeting not just the short-term policy rate but – within limits...

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...

Critical transitions in financial markets

Critical transitions in financial markets are shifts in prices and operational structure to a new equilibrium after reaching a tipping point. “Complexity theory” helps...

Japan’s “Quantitative and Qualitative Easing”

On April 4 Bank of Japan Governor Haruhiko Kuroda unveiled aggressive “Quantitative and Qualitative Monetary Easing” (QQE), in order to meet a 2% inflation...

The global effects of a U.S. term premium shock

Empirical research suggests that shocks to U.S. treasury term premia have had a persistent subsequent impact on term premia in other developed and emerging fixed...

The limitations of ECB bond purchases

The European Central Bank's public sector bond purchases are sizeable and their pace may increase further. However, issue and issuer limits constrain their time horizon. For...

Inflation: risk without premium

Historically, securities that lose value as inflation increases have paid a sizable risk premium. However, there is evidence that inflation risk premia have vanished...

“Helicopter money”: A practical guide for markets

If current non-conventional monetary policies fail to contain deflation risk, some form of debt monetization or “helicopter money” will become a policy option. The...

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...

Policy rates and equity volatility

Measures of monetary policy rate uncertainty significantly improve forecasting models for equity volatility and variance risk premia. Theoretically, there is a strong link between...

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A new theoretical paper illustrates the logic behind runs and crashes in modern safe asset markets. Safe assets are characterized by stable value and...

Copulas and trading strategies

Reliance on linear correlation coefficients and joint normal distribution of returns in multi-asset trading strategies can be badly misleading. Such conventions often overestimate diversification...

Trend following: combining market and macro information

Classic trend following is based on market prices or returns. Market trends are relatively cheap to produce, popular, and plausibly generate value in the...

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