Download as PDF The purpose of this special report is to introduce the emerging class of rough volatility models. Rough volatility is a relatively new concept originating from the empirical observation that log-volatility essentially behaves as a fractional Brownian motion at any reasonable timescale. While rough volatility is found to Read more…
Introduction Volatility is a key feature of financial markets. It is commonly used as a measure for risk and is a common an indicator of the investors’ fear and concern about the future. While higher volatility means bigger profits and losses in a directional strategy (one which bets on a Read more…
The concept of risk parity is not well-known among market participants. However, its resiliency to different market environment makes it a very interesting capital allocation strategy. It was first theorized in the sixties by Ray Dalio – founder of Bridgewater Associates – when he tried to find an answer to Read more…
The main purpose of the following Special Report is to understand how bear and bull markets develop over time and how it is possible to forecast their path. With respect to forecasting bear markets, our focus will be on non-parametric models developed following the algorithms of Bry and Boschan (1971). Read more…
The famous Black-Scholes model is a mathematical model used for pricing financial derivatives. It is particularly useful because it offers an explicit formula for the value of a European option in terms of time to expiry of the contract T, risk-free interest rate r, strike price of the option K, Read more…
In finance, a covariance matrix can be a useful tool to estimate the cross correlations between different stocks. However, historical data contains random noise, which can alter the underlying information. Here we illustrate how Random Matrix Theory can be used to filter a diagonalisable matrix and how information about the market Read more…
Japanese Yen touched a 17-month high of Y107.61 versus the US dollar this Monday. The safe haven currency has rallied more than 10 percent after Bank of Japan’s surprising negative interest rate decision on banks’ excess reserves in late January. Japanese government also sold 10-year bonds with a yield below Read more…
Not long ago, two major oil-producing countries (Russia and Saudi Arabia) reached an agreement, according to which the stake of output of those countries was capped at January-2016 levels. The move was very unexpected, since no one had bet that the deal would be reached, thus oil prices went through Read more…