In this article, we will develop an investment strategy on currency, specifically on the USD/CHF pair. We will: Introduce the currency carry trade (for those familiar with it, you are welcomed to skip this brief explanation) Review the developments in the Switzerland economy, and move to the current environment Read more…
US This week, US equities ended on a low note as the market kept a close watch on rising UST yields and Apple was a drag on the tech sector. The benchmark 10-year yield rose to its highest level in four years. The three major equity indices still managed to Read more…
Introduction on TIPS and Gold as inflation hedge Generally, an assets is considered t o be an “inflation hedge” if either its purchasing power is maintained over the long run or its nominal returns closely track realized inflation over shorter horizons. Gold and TIPS fall into this category and are Read more…
Differences between historical realized volatility and option implied volatility has for long been known as a potential indicator for volatility mispricing. To our knowledge, the first well-known academic study on the topic was conducted by Goyal and Saretto in 2009 and published as the paper ‘Cross-section of Option Returns and Read more…
US Over the course of last week, the most important data concerning the United States came out on Friday 14th, when the University of Michigan’s Consumer Sentiment was released. The Consumer Sentiment was 97.8, below the consensus 100.5 and the previous 101.4. This drop seems to due to concerns about Read more…
In the current increasing interest rate environment, the debate about the controversial but nevertheless important benchmark has sparked off again. This is why, we thought it relevant to provide in the following article a refresher on the history and functioning of the London Interbank Offered Rate, as well as examine Read more…
Introduction The 2008 Global Financial Crisis (GFC) and subsequent Great Recession pushed the US Federal Reserve to deploy two main tools of monetary interventionism: 1) Quantitative Easing (QE) 2) Reduction of the federal funds rate to unprecedented historical lows The Federal Reserve began purchasing both sovereign and corporate bonds in Read more…
US The US equity market has witnessed a lot of volatility during last week. The trade war with China has weighed on all the three major indices: S&P 500 lost 1.38%, Nasdaq and Dow Jones scored -2.10% and -0.71% respectively. On Monday, the slide of some big Tech firms led Read more…
Introduction In the midst of a particularly cold North American winter induced by an unexpected southwards movement of the polar vertex in late December 2017, New York Harbor Heating Oil surged nearly 15% from its December low through the end of January. This important petroleum middle distillate often used for Read more…
Introduction To maximise our profit when investing in financial instruments we try to rely on analysis of the underlying values, macroeconomic trends and possibly other quantitative methods. However, as much as we try to optimise our returns, we often fail to do so, as we fall prey to our own Read more…
US Continuing a monthly streak of surprises, after gapping down -0.66% immediately after Gary Cohn’s resignation as economic advisor of the current US administration, the S&P recovered, increasing 3.25% weekly. In particular all the major indexes rallied (Dow +1,77%, S&P +1,74%, Nasdaq +1,93%) on Friday as non-farm payrolls were 313k Read more…
Macro Environment 2018 is bound to be the point of inflection for the Greek economy. The Bank of Greece reports that GDP will grow 2.5% over the next two years, while the European Commission expects a 1.6% growth in 2017 – the economy’s best performance in a decade. Greece’s 10-year Read more…
The Theory Behind the Implied Vol Jump The classical Black-Scholes model for option pricing assumes that stock prices follow a Geometric Brownian Motion (GBM) with constant drift and, more relevant for the scope of this article, constant volatility (σ). Analytically: where r is the risk-free rate, q is dividend yield Read more…
US This week, the main events were the inaugural testimony by new Federal Reserve chair Jay Powell to the House Financial Services and Senate Banking Committees on Tuesday and Thursday, respectively, and the announcement that President Trump is planning to impose tariffs on steel (10%) and aluminium (25%) imports. Mr. Read more…
History What made gold a unique asset is its shininess, its malleability and the property of endurable integrity over time. Thanks to these characteristics, it has been widely used in the history of mankind for two core aims: To celebrate the human power and wealth thanks to its magnificence, To Read more…