Investors seem to expect benign market conditions to continue, but they should remain aware of the historical tendency for rapid, positive shifts in volatility measures to occur.
Currency risk is embedded within CDS prices; if a country defaults, the value of its currency is likely to drop, to the detriment of investors with CDS exposure to that currency. The recently widening gap between European sovereign CDS priced in EUR and those priced in USD may therefore herald rising distress for the European Union as a whole.
The Information Age has transformed and brought spectacular advances to a wide range of industries, from medicine to transportation and beyond. Investment management has been by some measures slower to evolve, but it, too, is changing.
The pricing of corporate credit can be succinctly understood via the credit-implied volatility (CIV) surface.
Pensions’ return forecasts appear inversely related to their funded ratios, potentially indicating a structural bias.
An analysis of public pensions’ asset allocations suggests that their forecasts may prove too optimistic.
With the recent fall in correlations across asset classes, allocators may find diversification more beneficial for their portfolios.
How can asset allocators quantify the effects of political risk on financial markets? A simple and tractable empirical approach.
A Jack Treynor Prize-winning paper co-authored by a Two Sigma researcher provides a convenient method for summarizing risk exposure in credit portfolios.
During the past five years, forecasters repeatedly have proffered overly optimistic forecasts for long-term growth and excessively pessimistic near-term forecasts