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…
Introduction The purpose of this article is to analyse different futures markets on cryptocurrencies and try to find justifications for excessive premia and discrepancies in prices. Firstly, we are going to present a general overview on cryptocurrencies and futures, then a short analysis of premia and finally we’ll look at Read more…
US This week, the main event was the release on Wednesday of the minutes of the Fed’s January policy meeting. These confirmed the growing sense of confidence among policymakers over the outlook for the US economy and inflation giving further credit to the hypothesis that the FED will raise the Read more…
US On Wednesday some important economic figures were released. The Core CPI Index and the CPI Index went up respectively by 0.3% and 0.5% (MoM) in January fueling up US inflation expectations; the movement was larger than forecasted and was offset by the data on Retail Sales which went down Read more…
Introduction As we noted in our final publication of 2017, the year 2017 was characterized by very low volatility and stable positive returns on the majority of stock markets. This took place even despite the start of stimulus withdrawal by major central banks which was seen in the gradual increase Read more…
Introduction The low-interest rate environment which has characterised the markets since the breakout of the financial crisis left fixed-income investors with one way to continue to benefit from high yields: emerging markets. In addition to this, China started a credit expansion in order to keep the levels of GDP growth Read more…
In this article we would like to assess the current year from a macroeconomic as well as from a market perspective. 2017 – The Year Almost Behind Us So far, 2017 has been characterized by: Synchronized global growth reaching 3,7% Equities (+17,3%) outperformed bond (+2,6%) Sector-by-sector speaking healthcare (+19,3%) and Read more…
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…