Interest rate swap returns: empirical lessons
Interest rate swaps trade duration risk across developed and emerging markets. Since 2000 fixed rate receivers have posted positive returns in 26 of 27...
Analyzing global fixed income markets with tensors
Roughly speaking, a tensor is an array (generalization of a matrix) of numbers that transform according to certain rules when the array’s coordinates change....
The emotion beta of stocks
Stock markets cater to both the financial and emotional needs of investors. In particular, integral emotions, which are caused by decisions themselves, are useful...
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...
Summary: Macro information efficiency and investment strategies
Markets are not efficient in respect to macroeconomic information, because both research and strategy development are expensive. As a result, there is ample scope for value generation...
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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...