Category Financial Markets & Insituitions
Managing risks of Digital payoffs – Overhedging
When a new trade comes to the risk manager in a bank for approval, he tries to determine both the quality and the quantity of the risks inherent in the trade. If he’s not comfortable with either of the two, he may not approve it. Some of the factors that are considered are:- 1. Whether […]
Bonds – How Inflation And Interest Rates Affect Bonds – Investopedia
Bonds – How Inflation And Interest Rates Affect Bonds Ownership of a bond is the ownership of a stream of future cash payments. Those cash payments are usually made in the form of periodic interest payments and the return ofprincipal when the bond matures. In the absence of credit risk (the risk of default), the value of that stream of […]
6 Factors That Influence Exchange Rates
By Jason Van Bergen on July 23, 2010 Aside from factors such as interest rates and inflation, the exchange rate is one of the most important determinants of a country’s relative level of economic health. Exchange rates play a vital role in a country’s level of trade, which is critical to most every free market economy in the world. For this reason, […]
Les Crédit Linked Note (CLN)
Le titre obligataire lié aussi appelé credit linked note (CLN) est un dérivé de crédit financé qui a recours dans son montage à un credit default swap (CDS) pour transférer un risque de crédit, mais ce en passant par un fonds commun de créances (terme anglo-saxon : special purpose vehicle ou SPV). Cet instrument est notamment […]
Investopedia explains ‘Index-Linked Bond’
Definition of ‘Index-Linked Bond’ A bond in which payment of income on the principal is related to a specific price index – often the Consumer Price Index. This feature provides protection to investors by shielding them from changes in the underlying index. The bond’s cash flows are adjusted to ensure that the holder of the […]
How The U.S. Government Formulates Monetary Policy
By Reem Heakal on December 31, 2011 A monetary policy is the means by which a central bank (also known as the “bank’s bank” or the “bank of last resort”) influences the demand, supply and, hence, price of money and credit, in order to direct a nation’s economic objectives. Following the Federal Reserve Act of 1913, the Federal Reserve […]
The rise of BlackRock
The rise of BlackRock In 25 years, BlackRock has become the world’s biggest investor. Is its dominance a problem? Dec 7th 2013 | From the print edition ASK conspiracy theorists who they think really runs the world, and they will probably point to global banks, such as Citigroup, Bank of America and JPMorgan Chase. Oil […]
Collateralized Debt Obligations : Fonctionnement et Valorisation
La crise subprime ainsi que la crise financière qui s’ensuivit ont mis en évidence les problèmes de valorisation de certains produits de gré à gré dont les Collateralized Debt Obligations (CDOs). Ces derniers sont des portefeuilles intégrant des produits de dettes comme actifs et émettant des créances de “seniorité” différente sur ces actifs. On distingue […]
What is gamma hedging?
What is gamma hedging? By Simon Gleadall, CEO of Volcube. To understand gamma hedging it is important to understand delta hedging first. Delta hedging eliminates the risk to an option owing to a change in the price of the underlying. Gamma hedging basically refers to a re-adjustment of a delta hedge. In this article we […]
Risk on/risk off correlations are fading fast
Risk on/risk off correlations are fading fast By Stephen Foley in New York If risk on/risk off is off, what’s on? It had all been so simple. Good news on US jobs? Buy equities, commodities, emerging markets, and sell bonds. New eurozone wobble? Sell equities, commodities, emerging markets, buy bonds. More ON THIS STORY […]
Rising Rates and Your Investments
Rising Rates and Your Investments What You Should Know The bond markets are extremely active, with interest rates constantly changing in response to a number of factors including changes in the supply and demand of credit, Federal Reserve policy, fiscal policy, exchange rates, economic conditions, market psychology and, above all, changes in expectations about inflation. […]
Reading Bond Prices In the Newspaper
What You Should Know Reading Bond Prices In the Newspaper Where to Look If you’re interested in buying or selling bonds, it’s a good idea to start out by comparing the prices of similar securities. Just as you would with any important purchase, such as a home or a car, checking out the current prices […]
101 Free Resources for Bond Investors
101 Free Resources for Bond Investors April 27th, 2012 by David Waring, learnbond.com Quick Jump Links: Bond Market Blogs Bond Market on Twitter Traditional Media Bond News Sources Bond Market Data Sources Free Bond Market Research Free Bond Market Education Books on the Bond Market Discount Bond Brokers Ratings Agencies Did we miss […]
Debt Investing Concept: Credit Curves
Debt Investing Concept: Credit Curves While this post is more particular to high yield and investment grade bonds, than to distressed investing, I believe it is an important concept considering what is going on in certain pockets of the market today. A credit curve is essentially the spread over treasuries of various maturities for a single bond […]
Current Environment in high yield
– Opportunity in high yield still exists given attractive spreads and lower interest rate sensitivity Fundamentals Corporate balance sheets remain healthy and supportive of the high yield market Companies continue to refinance qt lower rates and extend debt maturity profile Default rates remain around 1%, still well below historical averages (4%) Technicals Retail fund flows […]
Why hedge-fund middlemen must adapt or die
Firms that invest in hedge funds on behalf of large institutions and wealthy individuals—an industry that got its U.S. start in Chicago more than 40 years ago—are recasting their businesses as clients unhappy with an extra layer of fees are bypassing the middlemen. In the most striking local example, Chicago-based Grosvenor Capital Management LP, a […]
I think exports from emerging economies to Europe is the key thing to watch. If the early signs of acceleration (and shrinking of the eurozone’s current account) extended into something more, then it will be a very bullish sign for EM. -Bartosz Paxlowski, Global Head of EM Strategy at BNP Paribas
When Governments Get Involved, All Bets Are Off
Granted it’s a bit a cheap shot to choose USDJPY, where the forecast distribution looks more like the Manhatton skyline than a bell curve, but with the market only being right twice in the last eighteen quarters, you can’t help but fee that when governments and central banks get involved in markets, strategists should take […]
The Whole Debate About The Stock Market
“Normally in th emiddle of an economic cycle, investment spending is 2 to 3 times GDP growth. Strong investment spending is what drives S&P 500 sales and non-financial profits. The whole debate about the S&P is about when this turns back up again.” — David Bianco, Chief US Equity Strategist at Deutsche Bank
Alternative Beta
Alternative Beta, in the context of risk premium oriented investing, is a concept that extends the idea of traditional passive investing into the alternative investment space. Alternative beta refers to risk premia which are available in the global capital markets beyond traditional equity or fixed income related long only investments. Generally risk premia are returns […]
Bond Basics: Yield, Price And Other Confusion
Understanding the price fluctuation of bonds is probably the most confusing part of this lesson. In fact, many new investors are surprised to learn that a bond’s price changes on a daily basis, just like that of any other publicly-traded security. Up to this point, we’ve talked about bonds as if every investor holds them […]
Bridgewater
We believe the best way to manage money is to separate investment alpha (value-added return from active management) from beta (return from passively holding a portfolio) and then create optimal portfolios of each. At Bridgewater, we manage money for clients across most major asset classes by replicating a client benchmark and overlying the benchmark with […]
Short Selling: Conclusion
By Brigitte Yuille Short selling is another technique you can add to your trading toolbox. That is, if it fits with your risk tolerance and investing style. Short selling provides a sizable opportunity with a hefty dose of risk. We hope this tutorial has enabled you to understand whether it’s something you would like to pursue. […]
Short Selling: Ethics And The Role Of Short Selling
By Brigitte Yuille It’s safe to say that short sellers aren’t the most popular people on Wall Street. Many investors see short selling as “un-American” and “betting against the home team” because these sellers are perceived to seek out troubled companies. Some critics even believe that short sales are a major cause of market downturns, such as the crash […]
Short Selling: The Risks
By Brigitte Yuille Now that we’ve introduced short selling, let’s make one thing clear: shorting is risky. Actually, we’ll rephrase that. Shorting is very, very risky. It’s not unlike running with the bulls in Spain: you can either have a great time, or you can get trampled. You can think of the outcome of a short […]
Short Selling: The Transaction
By Brigitte Yuille Suppose that, after hours of painstaking research and analysis, you decide that company XYZ is dead in the water. The stock is currently trading at $65, but you predict it will trade much lower in the coming months. In order to capitalize on the decline, you decide to short sell shares of XYZ […]
Short Selling: Why Short?
By Brigitte Yuille Generally, the two main reasons to short are to either speculate or to hedge. Speculate When you speculate, you are watching for fluctuations in the market in order to quickly make a big profit off of a high-risk investment. Speculation has been perceived negatively because it has been likened to gambling. However, speculation involves […]
Short Selling: What Is Short Selling?
First, let’s describe what short selling means when you purchase shares of stock. In purchasing stocks, you buy a piece of ownership in the company. The buying and selling of stocks can occur with a stock broker or directly from the company. Brokers are most commonly used. They serve as an intermediary between the investor […]
Short Selling: Introduction
By Brigitte Yuille Have you ever been absolutely sure that a stock was going to decline and wanted to profit from its regrettable demise? Have you ever wished that you could see your portfolio increase in value during abear market? Both scenarios are possible. Many investors make money on a decline in an individual stock or […]
The Fed’s Surprise and Yellen’s Challenge
Mohamed A. El-Erian Mohamed A. El-Erian is CEO and co-Chief Investment Officer of the global investment company PIMCO, with approximately $2 trillion in assets under management. He previously worked at the Internation… The Fed’s Surprise and Yellen’s Challenge NEWPORT BEACH – The US Federal Reserve sparked a global – and now month-long – guessing […]
Activist Investors ?
Investing, at its core, is often about identification of a pricing anomaly and, thereafter, realization of profit from its correction. The approach of some investors is to take positions and hold onto them in the belief that the market will, over time, also come to recognize the anomaly and correct the value naturally. Others, however, […]
Hedge Fund Sector Review
Hedge Funds Have produced generally positive performance YTD in 2013 through May with fundamental and tactical trading managers benefiting from a more favorable macro economic backdrop and supportive market conditions. Equity L/S Equity Long/Short managers have generated positive YTD performance through May. While monthly returns have been consistently positive, performance in recent months has been […]
So You Think You Can Start a Hedge Fund? How to Become the Next Ken Griffin, Part 1 – Getting Up and Running
First, the bad news: you haven’t picked the best time to start a hedge fund (assuming that you are reading this anywhere in between 2011 and the present day). It was much better to get into the gameearly – i.e. the late 90′s or early 2000′s – before everyone else also wanted to start their own […]
Asset-Swap Spread (ASW) & Zero-volatility spread ( Z-spread)
Definition ASW The difference between the yield of a bond and the LIBOR curve, expressed in basis points. The asset-swap spread is designed to show the credit risk associated with the bond. Analysts will typically look at both the Z-spread and the asset-swap spread to see if there are discrepancies in a bond’s price. Unlike […]
What Is Value Investing and Value-Driven Asset Allocation?
What Is Value Investing and Value-Driven Asset Allocation? Morningstar’s Daniel Needham explains how investors can use a value strategy to dictate their asset allocation over time. Related Links Full Coverage of the Morningstar Investment Conference Holly Cook: What is value investing and what is value-driven asset allocation? Here to answer those questions is Daniel Needham. He […]
World Economic Outlook (WEO)
Hopes, Realities, and Risks Global economic prospects have improved again, but the bumpy recovery and skewed macroeconomic policy mix in advanced economies are complicating policymaking in emerging market economies. Chapter 3 examines the prospects for inflation, particularly because inflation was remarkably stable in the wake of the Great Recession and, in fact, has become less […]
The mystery of Ben Bernanke and the Japanese ketchup is solved!
The mystery of Ben Bernanke and the Japanese ketchup is solved! By Neil Irwin, Published: May 12, 2013 at 3:21 pmE-mail reporter In my book about central banking, I report on a minor mystery involving the current chairman of the Federal Reserve, ketchup and the Bank of Japan. I now think it is solved. Flashback a decade. In the […]
US and Japanese Quantitative Easing, Bernanke said, it is Credit Easing
US and Japanese Quantitative Easing Quantitative Easing
The Financial Engineer 