United States US stocks closed mostly higher on the week ended December 1, 2017. The Dow Jones Industrial Average recorded its best weekly gain for the year, gaining 673.60 points (+2.9%) to close at 24,231.59. The S&P 500 Index gained 39.80 points (+1.5%) to close at 2,642.22, while the Nasdaq Read more…
Trading the Dispersion: chapter III Here is the final part of our series about the strategy known as dispersion trading. The article will first focus on an additional dispersion indicator we will employ to time the entry and exit points of our strategy. Then, we will derive the optimal number Read more…
Introduction The introduction of the common currency started a landmark European integration process. However, the sovereign debt crisis showed all the limits of an incomplete European integration, limited to monetary policy only, with a single central bank and 19 independent debt markets. The sovereign debt crisis was exacerbated by a Read more…
United States Stocks were higher in the holiday-shortened week amid expectations that a strong holiday season would boost top-line growth for retailers, ending a two-week stretch of lower markets. The S&P 500 gained 0.93% on the week and finished at a record high of 2,602.42. The Dow Jones Industrial Average Read more…
Introduction In this article, we look at the yield curve of US govies, and in particular we will try to understand its flattening upon rate hikes. This puzzling phenomenon is not something new under the horizon. The same effect was observed under the Greenspan led of the FED. Between June Read more…
Would you buy risky corporate bonds whose return is slightly higher than one of the safest securities in the world, US T-Bills? Probably not. Nonetheless, the market seems to accept this. The question is: how long will it last? We believe this situation will not persist in the long run Read more…
United States This week, similarly to the past month, the main focus of the US market was the tax reform which would strongly impact US small-caps equities and the US dollar. In particular, on Thursday, the US House of Representatives voted to pass its version of the bill. Although Read more…
Investors are demanding an increasing amount of leveraged loans, with a lower capital cushions and little covenant protections. Furthermore, they are demanding a lower spread over the floating reference rate. In this article, we will give an overview of the situation, the fundamental reasons behind this trend and the potential Read more…
Quick recap In the last newsletter we published an article providing the theoretical foundations of Dispersion Trading (in case you missed it: https://bsic.it/lost-dispersion-trading/). As promised to our readers, here is a follow up with some real market applications. However, you still need to wait for the chapter III in the Read more…
United States While markets hit record highs on Wednesday (Nov. 7), investors concerned about the prospects for tax cuts took the chance to get out of the equity market, pushing the markets down in the last 2 trading sessions of the week. This was probably the reaction to the news Read more…
The market microstructure of electronic markets is a topic that is usually left outside the “standard” set of courses within an academic degree, both at the B.Sc. and at the M.Sc. level. However, some knowledge of market microstructure can be particularly handy for any students willing to build a career Read more…
Since the development of the Black-Scholes formula for determination of the price of options, the “implied volatility” has been an ordinary tern in markets participants’ vocabulary. Given the non-linear payoff of options, they can be used to implement trading strategies which are not directional (that is, they are not based Read more…
United States Last Thursday President Trump nominated Jerome H. Powell to chair the Federal Reserve, bypassing Janet L. Yellen for a second term but turning to a replacement who is expected to stay the course on monetary policy if the economy continues its steady growth. As a result, investors do Read more…
Introduction to the Yield Curve and its Evolution 15 August 1971, the day the Bretton Wood System was dissolved, will remain an important moment in economic history, representing a major shift in our international monetary system, a change in approach to perceived market risk and a departure from the gold Read more…
One more (last) round of QE After 2008, the European Union has faced some serious problems and particularly troublesome was the financial sector after well-known streak of bankruptcies that plagued the whole world. Given the heterogeneity of European nations, it was difficult to find a unique solution for all of Read more…