Markets
WHAT DRIVES CREDIT? Understanding the Cross Section of Expected Corporate Bond Returns (Part II)
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Markets
Pairs Trading: Building a Backtesting Environment with Python
Download PDF Introduction Statistical arbitrage is a class of trading strategies that profit from exploiting what are believed to be market inefficiencies. These inefficiencies are determined through statistical and econometric techniques. Note that the arbitrage part should by no means suggest a riskless strategy, rather a strategy in which risk Read more…
Markets
Market Recap 24/04/2022
Download PDF USA Following signs of a more hawkish central bank policy, bond markets in the US sold off substantially over the course of the week. On Tuesday, Charles Evans, the Chicago Fed’s president defined a year-end range for the policy rate between 2.25 and 2.5 per cent as realistic, Read more…
Markets
WHAT DRIVES CREDIT? Understanding the Cross Section of Expected Corporate Bond Returns
Download PDF Abstract While the literature investigating risk premia driving the cross section of stock returns is extensive, fewer studies analyze corporate bond returns. We set out to understand which factors and firm characteristics command a premium in terms of expected returns on corporate bonds, both in the investment grade Read more…
Markets
Level K Thinking
Download PDF Introduction “For it is, so to speak, a game of Snap, of Old Maid, a pastime in which he is victor who says Snap neither too soon nor too late, who passes the Old Maid to his neighbour before the game is over, who secures a chair for Read more…
Markets
Market Recap 10/04/2022
Download PDF Sentiment in global financial markets was once again largely affected by the developments of Russia’s invasion of Ukraine, and by the Federal Reserve policy. USA The declarations of Fed Governor Lael Brainard on Tuesday and the release of minutes of the Federal Open Market Committee of mid-March on Read more…
Markets
Deep insights into one of the most reliable recessions predictor: the yield curve inversion
Download PDF Introduction Economics and the world economy are peculiar for being so unpredictable. The constant involvement of human beings leads them far from being an exact science. Correspondingly, financial markets are even more uncertain, constantly driven by human behaviour. For this reason, the idea that one very simple predictor Read more…
Markets
Behavioral Explanations for the Low-Beta Anomaly
Download PDF The Low-Beta Anomaly The Low-Beta Anomaly is a well-documented stock market anomaly in which low beta stocks outperform high beta stocks. This goes against what basic financial intuition and theory would suggest; most notably it stands in direct opposition to the Capital Asset Pricing Model which stipulates that Read more…
Markets
Market Recap 3/04/2022
Download PDF USA On Monday, Ukrainian troops managed to liberate Irpin, a suburb town north of Kyiv. Negotiations to reach a cease-fire agreement resumed on Tuesday in Turkey, after the U.S. Secretary of State Antony Blinken pointed out that neither the U.S. nor NATO are seeking a regime change in Read more…
Markets
Uncovering the reasons behind the Yen’s (recent) weakness
Download PDF Introduction Recent data on the USD/JPY pair showed a significant strengthening of the US dollar against the Japanese currency, reaching an all-time high since 2016, marking almost a 5% decline YTD. This piece of news, however, is only the most recent episode of a significant weakening streak in Read more…
Markets
Market Recap 27/03/2022
Download PDF USA Major US indexes advanced this week, extending large gains achieved during the previous 5-day session, with the S&P 500 now back at a level last seen on February 10. The VIX continued pointing lower due to this positive trend, closing the week at just above 20. Investors Read more…
Markets
Investing in the Evolution of Energy
Download PDF Introduction The recent developments in the Russian invasion of Ukraine have led to an exponential increase in energy prices. This is due to the threat that Russia’s war poses to energy supply, as the country is one of the biggest worldwide players in crude oil, natural gas, and Read more…
Markets
Market Recap 06/03/2022
Download PDF USA US main indexes ended another week in red territory, with the S&P 500 down 1.27% and the NASDAQ Composite losing more than double this figure. The worst performers mainly pertain to the financial, technology and communication services sectors. The energy industry shined instead, yielding huge gains thanks Read more…
Markets
Relative Value Strategies for Equities
Download PDF Introduction Relative Value strategies in equities are all those strategies that seek to minimize their systematic risk exposures while retaining exposure to certain idiosyncratic factors. We decided to analyze those strategies because their non-directional nature can be interesting in the current environment characterized by high geopolitical tensions and Read more…
Markets
How Dealers’ Gamma impacts underlying stocks
Download PDF Introduction What happens in option markets strongly influences the behavior of the underlying asset. In this article, we review the evidence and academic research on the dynamic relation between market makers’ gamma exposure and the price process of the underlying assets, specifically in terms of intraday volatility and Read more…