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...

Macro information waste and the quantamental solution

Financial markets are not macro information efficient. This means that investment decisions miss out on ample relevant macroeconomic data and facts. Information goes to...

Why and when financial markets are herding

Herding arises from deliberate decisions of informed traders to follow others. It can create inefficiency, dislocations and, hence, profit opportunities. A paper by German...

Understanding negative inflation risk premia

Inflation risk premia in the U.S. and the euro area have disappeared or even turned negative since the great financial crisis, according to various...

A theory of information inefficiency of markets

Conventional wisdom is that markets are information efficient. Alas, a simple game-theoretical model illustrates that value traders only have an incentive to invest in...

Commodity trends as predictors of bond returns

Simple commodity price changes may reflect either supply or demand shocks. However, filtered commodity price trends are plausibly more aligned with demand, economic growth...

The predictive superiority of ensemble methods for CDS spreads

Through 'R' and 'Python' one can apply a wide range of methods for predicting financial market variables. Key concepts include penalized regression, such as...

The fall of inflation compensation

A new IJCB article shows that historically inflation expectations had a strong impact on long-term yields and economic data surprises had a...

VIX term structure as a trading signal

The VIX futures curve reflects expectations of future implied volatility of S&P500 index options. The slope of the curve is indicative of expected volatility...

Volatility insurance and exchange rate predictability

The cost of insuring against currency volatility can be measured as the difference between (options-based) implied volatility and (swaps-based) forward expected realized volatility. A...

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Transaction costs are a key consideration for the development of trading strategies; and not just in final profitability checks. Indeed, disregard for trading costs...

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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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