Basics of market liquidity risk

Market liquidity measures the cost efficiency of trading. Liquidity risk refers to the probability that these costs surge when trading is required. Liquidity and...

Trend following in U.S. equities

Trend following is a systematic investment style that takes directional positions in accordance with the difference between the current price and a moving average. For...

How nominal interest rates can become deeply negative

A recent IMF paper suggests that sizeable negative policy rates could be implemented in developed economies. The key would be a variable deposit fee...

Why and when “equity duration” matters

A new HSBC report suggests that if and when Quantitative Easing is being reversed it could be a watershed event for sectoral equity performance....

The pitfalls of emerging markets asset management

Dedicated EM exposure has surged by over 55% since 2007, with assets concentrated on few managers. A new BIS article points out that trading...

Risk management shocks and price distortions

Risk management relies on statistical metrics that converge on common standards. These metrics can change drastically alongside market conditions. A risk management shock is...

Central clearing and systemic risk

The expansion of central clearing has created a greater interconnectedness of financial markets and new systemic risks. Large losses of some of clearing members...

Cash hoarding and market dynamics

Institutional asset managers can aggravate market swings due to the pro-cyclicality of redemptions, internal leverage and cash positions. A new empirical analysis shows that...

China’s “double impact” on commodity prices

China consumes about one third of the world's commodities. However, its influence on commodity prices goes beyond that. Chinese institutions are also major users...

On “institutional herding”

Herding denotes broad uniformity of buying and selling across investors. If the transactions of one institution encourage or reinforce those of another, escalatory dynamics,...

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Crashes in safe asset markets

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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