Trading strategies based on implicit subsidies
Detecting implicit subsidies is one of the most effective principles of building macro trading strategies. Implicit subsidies manifest as expected excess returns over and...
Inflation expectations and interest rate swap returns
Inflation expectations wield great influence over fixed income returns. They determine the nominal yield required for a given equilibrium real interest rate, they influence...
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...
The power of macro trends in rates markets
Broad macroeconomic trends, such as inflation, economic growth, and credit creation are critical factors of shifts in monetary policy. Above-target trends support monetary tightening....
Six ways to estimate realized volatility
Asset return volatility is typically calculated as (annualized) standard deviation of returns over a sequence of periods, usually daily from close to close. However,...
Duration volatility risk premia
Duration volatility risk premium means compensation for bearing return volatility risk of an interest rate swap (IRS) contract. It is the scaled difference between...
Inflation as equity trading signal
Academic research suggests that high and rising consumer price inflation puts upward pressure on real discount rates and is a headwind for equity market...
Economic growth and FX forward returns
Economic growth differentials are plausible predictors of foreign exchange return trends because they are related to differences in monetary policy and return on investment....
How to use FX carry in trading strategies
FX forward-implied carry is a valid basis for trading strategies because it is related to divergences in monetary and financial conditions. However, nominal carry...
Equity convexity and gamma strategies
Equity convexity means that a stock outperforms in times of large upward or downward movements of the broad market: its elasticity to the market...
RECENT ARTICLES
Transaction costs and portfolio strategies
Transaction costs are a key consideration for the development of trading strategies; and not just in final profitability checks. Indeed, disregard for trading costs...
Intervention liquidity
Unsterilized central bank interventions in foreign exchange and securities markets increase base money liquidity independently from demand. Thus, they principally affect the money price...
Trading strategies based on implicit subsidies
Detecting implicit subsidies is one of the most effective principles of building macro trading strategies. Implicit subsidies manifest as expected excess returns over and...