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,...

How Fed asset purchases reduce yield term premia

An updated Federal Reserve paper suggests that there has long been a link between the net supply of government securities and term premia on...

Why decision makers are unprepared for crises

An ECB working paper explains formally why senior decision makers are unprepared for crises: they can only process limited quantities of information and rationally...

The short-term effects of U.S. economic data releases

A two-decade empirical study shows that bond and equity market prices are more likely to “jump” on days with U.S. economic data releases. In...

How EM bond funds exaggerate market volatility

A new BIS paper provides evidence that since 2013 fluctuations in EM fund flows and EM bond prices have reinforced each other. Both redemptions...

Volatility markets: a practitioner’s view

Christopher Cole argues that volatility markets are about trading both known and unknown risks. These risks require different pricing and cause different "crashes". Most...

The global systemic consequences of Solvency II

The new European insurance regulation will be introduced in 2016 with important consequences for the global financial system. A paper by Avinash Persaud argues...

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...

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...

Overshooting of U.S. Treasury yields

The U.S. rates research team of Bank of America/Merrill Lynch reasons that fears of less accommodative monetary policy can trigger a rise in U.S. Treasury...

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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...

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