Coruscation

Interest Rate Risk Monitor by James Baker
obsesses about bonds and interest rates.

And from the bond glossary:

Bond-Equivalent Effective Margin (BEEM): The average spread of an adjustable
rate security over the underlying index for the life of the instrument.
BEEM assumes the index remains constant and the coupon of the security
completely resets to the index over time, taking into account all caps, collars
and floors.

REMIC (Real Estate Mortgage Investment Conduit): A tax treatment introduced
by the 1986 Tax Reform Act for multi-class mortgage-backed securities such
as CMOs, Strips and senior/subordinated pass-throughs. An objective of the
REMIC legislation was to permit issuers to assume a more streamlined legal
form than that of the owners trust under which most CMOs had previously
been issued. Issuers have the option to elect REMIC tax treatment until 1992,
when REMIC tax treatment becomes mandatory. REMIC treatment identifies
the securities created as one or more "regular" interests and a single "residual"
interest. In market parlance, the term REMIC is used to refer to a structured
mortgage-backed security electing REMIC status. More loosely, it is used
interchangeably with CMO.

Posted by admin at 06:40 AM | Permalink | Comments (0) | TrackBacks (0)

Chris Whalen @ PRMIA, (archives).

Example:
There is nothing you can do to "fix" a CDO, to make it liquid,
other than to standardize the terms and trade it on an exchange.
The liquidity gridlock prevailing in the secondary market for CDOs
is the normal situation for such unique and entirely opaque
instruments, whereas the past illusion of liquidity was abnormal,
a byproduct of the "irrational exuberance" described by Greenspan
himself. Buy Side investors accepted the fallacy of liquidity -- until
they asked the Sell Side dealers to bid on the paper. That's when
the current trouble really began.

Continue reading "Christopher Whalen" »

Posted by admin at 12:13 AM | Permalink | Comments (0) | TrackBacks (0)

The history is that lenders move in great caravans between two
extreme points, which we can call stringency and accommodation.

-- James Grant, the editor of Grant's Interest Rate Observer.

Continue reading "Lending money: stringency and accommodation" »

Posted by admin at 05:38 AM | Permalink | Comments (0) | TrackBacks (0)

capitaliq corporate data: credit review.

Posted by admin at 07:22 PM | Permalink | Comments (0) | TrackBacks (0)

epicureandealmaker on fat tails.
Derivatives: Transfering risk or reducing risk ?

Posted by admin at 05:09 PM | Permalink | Comments (0) | TrackBacks (0)

Review Paper. Interest-rate term-structure pricing models: a review
Riccardo Rebonato

Interest-rate term structure modelling from the early short-rate-based
models to the current developments; use models for pricing complex
derivatives or for relative-value option trading. Therefore, relative-pricing
models are given a greater emphasis than equilibrium models.

The current state of modelling owes a lot to how models have
historically developed in the industry, and stresses the importance
of 'technological' developments (such as faster computers or more
efficient Monte Carlo techniques) in guiding the direction of theoretical
research.

The importance of the joint practices of vega hedging and daily
model-recalibration is analysed in detail. The relevance of market
incompleteness and of the possible informational inefficiency of
derivatives markets for calibration and pricing is also discussed.

Continue reading "Interest-rate term-structure pricing models: Riccardo Rebonato" »

Posted by admin at 12:07 AM | Permalink | Comments (0) | TrackBacks (0)

Accrued Interest aka accruedint, smart about finance and economics.
Why Home Depot should borrow more.

Posted by admin at 06:21 AM | Permalink | Comments (0) | TrackBacks (0)

Way of The Turtle, by Curtis Faith.

Relatively simple trading systems can provide a
tradable edge, but it is psychologically difficult
for traders to follow these systems and exploit
that edge.

Recommended via Traderfeed Brett and Abnornal.

Posted by admin at 06:01 PM | Permalink | Comments (0) | TrackBacks (0)

Prosper now enjoys some powerfu tools.

regression analysis forum
adverse selection says avoid the high rate borrowers.
Money Walks journal of patterns in data, performance.

Erics great survey or lenders: oustandings, return

Prosper Analytics animated charts, not quite chart junk. ROI.

P2P conventional loan analytics.

Prosper's own loan performance database.

Posted by admin at 10:41 PM | Permalink | Comments (0) | TrackBacks (0)

The Politico tracks Washington-centric partisan politics,
by ex-Washington Post staffers at Capitol Leader.

Posted by admin at 02:22 AM | Permalink | Comments (0) | TrackBacks (0)

it would seem that a sequence of price declines continuing for
many years has some substantial probability of happening.

Traditional finance theory has trouble reconciling even a semi-predictable
sequence of price declines with basic notions of market efficiency. The
situation we are facing is a reminder of the glaring inefficiencies and
incompleteness of existing markets for residential real estate, and
may be regarded as evidence that institutional changes will be coming
in future years to fundamentally change the nature of these markets.

Things That Go Boom
By ROBERT J. SHILLER
February 8, 2007; Page A15

Posted by admin at 02:22 AM | Permalink | Comments (0) | TrackBacks (0)

AllAboutAlpha, example:
value premium, value pricing.

return = alpha + beta * (market return)

Posted by admin at 07:41 AM | Permalink | Comments (0) | TrackBacks (0)

Housingderivatives tracks futures and options in housing prices.

Posted by admin at 07:03 PM | Permalink | Comments (0) | TrackBacks (0)

Moody's Commercial Mortgage Metrics (Moody's CMM)

TWC/CMM

Commercial Mortgage Metrics from Moody’s and TWR,
the leading source for commercial real estate performance
and valuation forecasting.

Risk Measures provided by CMM:

Probability of Default,
Loss Given Default,
Expected Loss,
Value at Risk,
Yield Degradation,
Risk Adjusted Yield,
Distance to Default.

Posted by omor at 07:35 PM | Permalink | Comments (0)

Hayre L.S., Chaudary S. et Young R.A. : "Anatomy of prepayments",
Journal of Fixed Income, 10, 2000. [PDF]
The paper is actually in chapter 4 of Hayre's book:
SSB's guide to MBS and ABS.

Posted by omor at 08:12 PM | Permalink | Comments (0)

The fun is tranching pools of mortgages into different securities.
You take a package of mortgages, preferably from different areas
of the country, and then you create different tranches with
different credit qualities, and then one zero coupon that bears
all the residual risk.

The first tranch, naturally, gets all the guarenteed income stream
(mortgage payments) and bears *no* (or actaully, very little)
prepayment risk (it is good to maturity).

The next tranch gets income stream, and bears some prepayment
risk (if there are a lot of prepayments, it gets a swath if the other
tranches are fully repaid), and on down the line.

The last tranch before the zero gets income, but bears risk
if the income falls short (mortgages default), and also bears
*the most* risk for prepayment (it has a call option owned
by the mortgage holders, they can repay the loan if the
interest rate changes). If you own this last tranch, you have
lots of duration and gamma risk, whereas if you own the
first tranch you have a very different profile.

The 'residual zero' tranch is practically binary.

Either it pays off, or it defaults and gets the (last) bit of
recovery value in liquidation. Lots of folks use equity
models to calculate expected return on these.

Freddie and Fannie do this, but also Morgan Stanley and Goldman.
If you want to play, you can call them and they can cobble toghether
a structured deal that will match pretty much any flavor you want.
Some of their customers are developers who are highly exposed
to one geographic area (say, Toll Brothers) and need hedging.

A good intro book is Collateralized Mortgage Obligations
by Chuck Ramsey and Frank Fabozzi. It goes beyond CMOs and
talks about a lot of the risk horizons and what traders of these
do and play with. Lots of former interest rate traders apparently
do well in this field.

As far as point three: you are talking 'real options' theory here,
and you have to look for a lot of asset value delta to overcome
the (identified) barriers to exit and entry and transactions costs.
I have yet to see a good book on the real options of real estate,
but the ones that come close deal with mineral rights and land
and mostly were developed for energy exploration. Not really
'commercial' or 'residential' real options.

Continue reading "Tranched mortgage pools" »

Posted by omor at 08:29 PM | Permalink | Comments (0)

So what moves mortgage rates ? Supply. Demand.
Competition for money. Inflation. The Economy.
Expectations. And you, of course.

Posted by omor at 01:52 AM | Permalink | Comments (0)

allaboutalpha, another investment and finance strategy journal
where Alpha Male opines about portabe alpha.

Posted by admin at 03:12 AM | Permalink | Comments (0) | TrackBacks (0)

financialrounds, an east coast finance
Professor.

Example: Scams.

Posted by admin at 07:15 PM | Permalink | Comments (0) | TrackBacks (0)

Financial Rounds recommends Eastern Finance Association's
Meetings.

Posted by admin at 06:45 AM | Permalink | Comments (0) | TrackBacks (0)

Carried Interest examines PIPE: private investment in public equity.

A PIPE is an alternative available to publicly traded companies that
need to raise money but don't want to go through the complexity
of selling shares through a secondary offering. Instead, the company
finds an investor and sells him a block of newly issued shares at an
agreed price or a block of debt which can later be converted into
shares (a structured PIPE).

Posted by admin at 05:37 AM | Permalink | Comments (0) | TrackBacks (0)

Tightening aimed (indirectly, of course!) at asset bubbles will be
reversed, big time, if and when those bubbles pop.

This is the Greenspan Put !

-- Paul McCulley.

Continue reading "The Greenspan Put" »

Posted by omor at 12:07 PM | Permalink | Comments (0)

Seeking Alpha neatly ontologized money science into

* Exchange-Traded Funds (ETFs)
* Market Commentary
* China Investing
* Media Investing
* Digital Media Investing
* Stock Market Blogs
* Economics Blogs
* Venture Capital Blogs
* Personal Finance Blogs

and brings me Herb Morgan, Chief Investment Officer of Efficient Market
Advisors, on The Problem With Vanguard ETFs.

Posted by omor at 11:01 PM | Permalink | Comments (0)

LIBOR (London Inter-Bank Offered Rate) is based on rates that
contributor banks in London offer each other for inter-bank
deposits.

From a bank's perspective, deposits are simply funds that are
loaned to them. So in effect, a LIBOR is a rate at which a
fellow London bank can borrow money from other banks. Rate
calculations incorporate variables such as time, maturity
and currency rates. There are hundreds of LIBOR rates reported
each month in numerous currencies.

Examples: the 1 Year LIBOR as published monthly by Fannie
Mae: rate history.

Posted by omor at 11:59 AM | Permalink | Comments (0)

Macroeconomic variables besides inflation and real activity drive the
yield curve in the framework of no-arbitrage affine term structure
models. We construct model-based projection of all the latent factors
onto the observable macro factors, which are real activity and
inflation.

As a result, the factors are decomposed into the “macro” part: a
linear function of the macro variables and their lags; and the truly
novel part which is orthogonal to the entire history of the macro
variables. We are able to relate the unexplained part of the short
rate to such measures of liquidity as the AAA credit spread and MZM
growth rate. The unexplained part of the slope is highly correlated
with the budget deficit.

Continue reading "Macroeconomic determinants of the yield curve" »

Posted by omor at 06:12 PM | Permalink | Comments (0)

Financial Rounds on how to argue gently *.

See also Suzette Haden Elgin ...

FR visits the FMA and finds another golden oldie: NotN.

Continue reading "Financial Rounds: Academics argue gently" »

Posted by omor at 11:22 PM | Permalink | Comments (0)

Buy a fund of funds or a hedge fund index ?
Measure risk with more than Sharpe ratio and multi-factor models.

edhec-risk reports research on investment alternatives.
Indexes and benchmarking
Multi-style multi-class risk allocation
Style and Performance analysis.

With very Germanic style:

Unique Access to all Information

Edhec-risk.com offers a unique access to all information appearing in
the different sections and archives. The information is accessed using
a search engine which generates both the key words and the content of
available documents. All the information available on the site is
accessible in relation to the key themes that correspond to the
Centre’s research programmes.

Continue reading "edhec-risk hedge fund research" »

Posted by omor at 08:50 PM | Permalink | Comments (0)

Moodys KMV 2005 papers.

Posted by omor at 12:52 PM | Permalink | Comments (0)

Conceived in 1949 by Alfred Winslow Jones, then an editor at Fortune
magazine, a hedge fund hedged its bets by taking "long" positions on
undervalued stock and "short" positions on overvalued stocks. The idea
was to be smart and nimble and bold, and to make oversized returns.

In the last decade, however, hedge fund companies have started to
resemble mutual fund companies: big, plodding institutions for
pensioners. Fewer and fewer hedge funds are now making impressive
returns for their investors. In the 10 years through April 1995,
according to the HFRI Fund Weighted Composite Index, the typical
hedge fund has only just managed to beat the S.& P. 500 Index, with
an average annual return of 11.97 percent compared with 10.26 percent
for the S.& P. 500. In other words, the Wild West has become a
suburban community, where managers ride golf carts instead of bucking
broncos.

What happened? For one thing, the amount of money invested in hedge
funds has doubled in the last five years, to $1 trillion. It's hard to
find creative places to park that much money. Besides, no special
skills are needed to create a hedge fund - that's why everyone and his
uncle know somebody who's starting one. Investors are partly to blame.
They love the glamour of investing in hedge funds, but, at the same
time, they can't tolerate risk. Most investors can't tolerate even a
month of losses.

The real problem with hedge funds may be the managers themselves:
they're earning too much money. It's almost vulgar. In the past, hedge
funds were paid 1 percent of assets under management, plus 20 percent
of that year's return. Recently, even as their performance has sagged,
more and more hedge funds have increased their fees to 2 percent of
assets under management - plus 20 percent of returns. To make big
money for themselves, hedge fund managers don't have to make big
returns; they just need to hold on to their pool of clients.

Continue reading "Hedge fund history" »

Posted by omor at 01:26 AM | Permalink | Comments (0)

Glyn Holton's Risk Glossary explains common terms such as capital asset
pricing model (CAPM).

Posted by omor at 02:48 PM | Permalink | Comments (0)

One of the most interesting ways to trade implied volatility (long)
is to buy forward starting out of the money calls on S&P500. At some
shops you can get decent pricing and better deal than the vol swap
market offers.

Since the option is forward starting it does not have any time decay
until the strike is set at a "strike date". At strike date the option
turns into a regular european call, which you can sell or dynamically
manage.

This strategy works like a call on volatility in the sense that vega
is convex. The skew and liquidity is a risk factor so I wouldn't got
that far out of the money.

Continue reading "VIX: trade implied volatility" »

Posted by omor at 10:06 PM | Permalink | Comments (0)

Can you trade the VIX ?

Chart: VIX vs SPY ?

CBOE micro site on the vix.

Continue reading "Trade the VIX" »

Posted by omor at 06:59 PM | Permalink | Comments (0)

In a way, hedge funds are to mutual funds what Evel Knievel was to
weekend motorcyclists. Unlike mutual funds, which are restricted in the
ways they can invest, hedge funds can use leverage, trade derivatives
and bet that stocks will fall, a technique called shorting. And unlike
mutual funds, which generally try to beat a market average, hedge funds
seek positive returns, even in down markets.

In 2003, the 25 highest-paid hedge fund managers earned more than $200
million, on average, according to a survey by Institutional Investor
magazine. The top-ranked manager, George Soros, took home $750 million
that year. At No. 2 was David Tepper, manager of the $3 billion
Appaloosa funds, who earned $510 million, according to the magazine.

Continue reading "Hedge funds bubble ?" »

Posted by omor at 11:16 PM | Permalink | Comments (0)

Riskmetrics journals and old (1999-2002) Working Papers.

Posted by omor at 04:34 AM | Permalink | Comments (0)

Torto Wheaton Research (TWR) studies commercial real estate.
Their Debt Risk Management has a nice list of features. See also
Portfolio strategy and misc research desk.

Continue reading "Torto Wheaton Research (TWR)" »

Posted by omor at 07:02 PM | Permalink | Comments (0)

PRMIA guide [PDF] prepares you for the Professional Risk Manager (PRM) exam.

Posted by omor at 10:56 PM | Permalink | Comments (0)

Hedge Week newsletter. See also Hedgefund News.

Posted by omor at 09:41 PM | Permalink | Comments (0)

IAFE: International Association of Financial Engineers

The IAFE is the professional society dedicated to fostering the
profession of quantitative finance by providing platforms for the
discussion of cutting-edge and pivotal issues in the field. Founded in
1992, the IAFE is composed of individual academics and practitioners
from banks, broker dealers, hedge funds, pension funds, asset
management firms, technology firms, regulatory bodies, accounting,
consulting and law firms, and universities across the globe. Through
frank discussions of current policy issues, hosting programs to
educate the finance community, and recognizing the outstanding
achievements in the field, the IAFE acts as a beacon for the
development of quantitative finance.

Throughout its history, the IAFE's pre-eminent leadership has
positioned us to respond with savvy to the evolving needs of the
financial engineering community. The IAFE's programs – from our
area-specific committees to our evening forums to the Financial
Engineer of the Year Award – are designed to provide our membership
with uniquely valuable activities to enhance their work in the field.

Posted by omor at 03:37 PM | Permalink | Comments (0)

What is Financial Engineering ?

Financial engineering involves the development and creative
application of financial theory and financial instruments to structure
solutions to complex financial problems and to exploit financial
opportunities. Financial engineering is not a tool. It is a profession
that uses tools, of which derivatives are one. Importantly, financial
engineering differs from financial analysis. The term “analysis” means
to “decompose in order to understand.” The term “engineering” means to
“build.”

Posted by omor at 06:43 PM | Permalink | Comments (0)

Financial Engineering Today newletter.

Posted by omor at 09:42 PM | Permalink | Comments (0)

Money words investing and finance glossary.
Example: Bulge Bracket

Posted by omor at 12:56 AM | Permalink | Comments (0)

Two approaches to examine the accuracy of default probability forecasts
for different rating grades and in particular, the respective
advantages and disadvantages of the two methods. Also, the effect of
independence assumptions is taken into account by modelling latent
variables like the asset correlation and dependency in time. Both
tests, the Extended Traffic Light Approach as well as an ad hoc normal
test work on time-varying default probability forecasts. They are
considered with respect to their practical use and potential
application in validating default forecasts in credit institutions.

Continue reading "Validating Default Probabilities on Short Time Series" »

Posted by omor at 07:21 PM | Permalink | Comments (0)

Credit risk is the distribution of financial losses due to unexpected
changes in the credit quality of a counterparty in a financial
agreement. Structural, reduced form and incomplete information
estimate joint default probabilities and prices of credit sensitive
securities.

Continue reading "Credit Risk Modeling and Valuation: An Introduction" »

Posted by omor at 07:57 PM | Permalink | Comments (0)

The determinants of regulatory capital (the minimum required by
regulation) and economic capital (the capital that shareholders would
choose in absence of regulation) in the context of the single risk
factor model that underlies the New Basel Capital Accord (Basel II)
do not depend on the same set of variables and do not react in the
same way to changes in their common determinants.

For plausible parameter values, they are both increasing in the
loans’ probability of default and loss given default, but variables
that affect economic but not regulatory capital, such as the
intermediation margin and the cost of capital, can move them
significantly apart. The results also show that market discipline,
proxied by the coverage of deposit insurance, increases economic
capital, although the effect is generally small.

Continue reading "Economic and Regulatory Capital What is the Difference ?" »

Posted by omor at 08:08 PM | Permalink | Comments (0)

Interest rate modelling for practical implication: Interest Rate Models by Damiano Brigo and Fabio Mercurio.
For a clear and conicse treatment we also suggest you Antoon Pelsser's Efficient Methods for Valuing Interest Rate Derivatives which is extremely interesting.

Posted by omor at 09:07 PM | Permalink | Comments (0)

Institutional Investor tracks Real Estate Finance and Investment.

Posted by omor at 11:33 PM | Permalink | Comments (0)

Probability of Default (PD)
- the probability that a specific customer will default
within the next 12 months.

Loss Given Default (LGD)
- the percentage of each credit facility that will be lost
if the customer defaults.

Exposure at Default (EAD)
- the expected exposure for each credit facility in the
event of a default.

Continue reading "Basel default" »

Posted by omor at 01:45 PM | Permalink | Comments (0)

401k planning contributions and investing for retirement: now.

Posted by omor at 11:02 PM | Permalink | Comments (0)

Surveys on the use of agency credit ratings reveal that some
investors believe that rating agencies are relatively slow in
adjusting their ratings. A well-accepted explanation for this
perception on the timeliness of ratings is the "through-the-cycle"
methodology that agencies use. According to Moody's, through-the-cycle
ratings are stable because they are intended to measure the risk of
default risk over long investment horizons, and because they are
changed only when agencies are confident that observed changes in a
company's risk profile are likely to be permanent. To verify this
explanation, we quantify the impact of the long-term default horizon
and the prudent migration policy on rating stability from the
perspective of an investor - with no desire for rating stability. This
is done by benchmarking agency ratings with a financial ratio-based
(credit scoring) agency-rating prediction model and (credit scoring)
default-prediction models of various time horizons. We also examine
rating migration practices. Final result is a better quantitative
understanding of the through-the-cycle methodology.

By varying the time horizon in the estimation of default-prediction
models, we search for a best match with the agency-rating prediction
model. Consistent with the agencies' stated objectives, we conclude
that agency ratings are focused on the long term. In contrast to
one-year default prediction models, agency ratings place less weight
on short-term indicators of credit quality.

We also demonstrate that the focus of agencies on long investment
horizons explains only part of the relative stability of agency
ratings. The other aspect of through-the-cycle rating methodology -
agency rating-migration policy - is an even more important factor
underlying the stability of agency ratings. We find that rating
migrations are triggered when the difference between the actual agency
rating and the model predicted rating exceeds a certain threshold
level. When rating migrations are triggered, agencies adjust their
ratings only partially, consistent with the known serial dependency of
agency rating migrations.

Continue reading "How Ratings Agencies Achieve Rating Stability" »

Posted by omor at 01:59 PM | Permalink | Comments (0)

Banks must measure the loss arising from counterparty default in order
to achieve Advanced-IRB compliance under the proposed Basel II minimum
regulatory capital framework. Which discount rate to use on cash
received post-default is a question that is the subject of
considerable disagreement amongst practitioners and banking
supervisors. We review alternative extant proposals and develop a new
method for choosing an appropriate discount rate contingent upon the
risk of the recovery cash flow. An example of how supervisory
determined LGD discount rates could be set is demonstrated.
Empirically, the required rate of return on defaulted corporate bonds
is shown to be similar in magnitude to the yield on BB rated debt. For
defaulted small and medium enterprise (SME) bank loans, the mean
discount rate is found to be similar, on average to the contract rate
pertaining at the time of default.

Continue reading "Discount Factor for Estimating Economic LGD" »

Posted by omor at 01:42 PM | Permalink | Comments (0)

ETFs are shares of a basket of stocks bought and sold as a single
investment. Investment companies create these stocks by buying the
underlying stocks and issuing ETF shares. Unlike mutual funds whose
price is set once per day, ETFs trade on stock exchanges at
constantly changing market prices. This prevents market timers
getting preferential prices like the recent mutual fund scandals.
Very large investors can issue new shares or redeem their shares for
the underlying stocks. This keeps the ETF price close in price to the
underlying shares. ETFs do not trade at sizable discounts or
surpluses to the underlying stocks like closed end mutual funds. If
the ETFs begin to trade with any significant discount or surplus,
large investors will issue new shares or redeem their shares to
eliminate the discount or surplus.

Continue reading "ETF" »

Posted by omor at 05:42 PM | Permalink | Comments (0)

Global Forex Trading offers DealBook® FX 2 'powerful online
currency trading' tool that provides you with instant access
to the forex market.

Posted by omor at 11:40 PM | Permalink | Comments (0)

PRMIA's risk news.

Week In Risk is published every Friday by Risk Communications.
It is (was ?) distributed by PRMIA, the Professional Risk Managers
International Association.

Posted by omor at 01:25 AM | Permalink | Comments (0)

Prediction Markets

We analyze the extent to which simple markets can be used to aggregate
disperse information into efficient forecasts of uncertain future
events. Drawing together data from a range of prediction contexts, we
show that market-generated forecasts are typically fairly accurate,
and that they outperform most moderately sophisticated benchmarks.

Carefully designed contracts can yield insight into the market's
expectations about probabilities, means and medians, and also
uncertainty about these parameters. Moreover, conditional markets can
effectively reveal the market's beliefs about regression coefficients,
although we still have the usual problem of disentangling correlation
from causation. We discuss a number of market design issues and
highlight domains in which prediction markets are most likely to be
useful.

Justin Wolfers (Stanford University)

Continue reading "Market-generated forecasts are typically accurate" »

Posted by omor at 03:40 PM | Permalink | Comments (0)

Understanding Credit Spread Markets

I describe results of empirical studies of historical spreads in the
corporate bond market and show how spread changes, regardless of
credit rating, are largely determined by a single common variable. In
addition, I calculate the component of corporate credit spreads due to
default probability and report analyses of the residual spreads as
functions of credit quality and duration.

Analysis of spread changes for other spread markets (e.g.
asset-backeds, emerging markets, etc.) reveal a large, but smaller,
degree of spread co-movement across sectors and indicate that sector
spreads trend and mean revert on roughly similar time scales. That is,
spread changes trend in the short term (under two years) and
mean-revert over longer periods.

That information, along with the CAPM and our strategists' monthly
outlooks, was used to construct a cross-sector asset allocation model
that consistently outperformed a benchmark portfolio in ten years of
out-of-sample testing.

Terry Benzschawel (Citigroup Global Markets)

Continue reading "Credit Spread determined by a single common variable" »

Posted by omor at 03:40 PM | Permalink | Comments (0)

Fixed Income Analysts Society (FIASI) director bios.

Posted by omor at 03:28 PM | Permalink | Comments (0)

As the director of risk analysis for the Office of the Comptroller of
the Currency, Jeffrey Brown spends most of his time reviewing how
banks use credit scoring and other risk-management tools. [1]

Credit scoring has revolutionized lending, but critics worry
institutions are pushing this technology beyond its limits.

Posted by omor at 09:03 PM | Permalink | Comments (0)

Probably the biggest eye-catcher is iShares FTSE/Xinhua China 25
Index Fund (FXI) — the first ETF investing solely in China
available to U.S. investors. Launched earlier this month,
the ETF tracks the 25 largest and most liquid Chinese stocks.
Of course, there's increasing talk of China's red-hot economy
cooling, but few expect the growth spigot to be shut entirely.
The China 25 Index Fund's expense ratio of 0.74% is higher
than that of most ETFs, but it's substantially lower than the
average China-region mutual fund's expense ratio of 2.37%,
according to Lipper. ETFs, by nature, carry lower expense ratios
than their mutual-fund counterparts. [1]

Standard and Poors index tracker.

Continue reading "ETF exchange traded funds" »

Posted by omor at 05:50 PM | Permalink | Comments (0)

FX FXStreet Foreign Exchange Currency news on trading and trends.

Posted by omor at 07:58 PM | Permalink | Comments (0)

VIX Volatility Index tools.

The VIX takes the weighted average of implied volatility for the
Standard and Poor's 100 Index (OEX calls and puts) and measures the
volatility of the market. A low VIX indicates trader confidence. A
high Vix the opposite. Dividing the S&P 500 by the Vix (ratio) gives
the confidence level in relation to the market. The higher the ratio
the higher the confidence.

StockCharts

Continue reading "VIX Volatility Index" »

Posted by omor at 09:17 PM | Permalink | Comments (0)

How much do you need to know to pass the CFA ? Here is some
advice for Chartered Financial Analyst aspirants.

They do not mean - have a general idea or sense of the material
or be able to pick the concept out of a lineup based on your
initial impression or cued recall.

They do mean Very quickly, relative to similar concepts and
formulas, distingush and differentiate the key concepts, recall
the special exceptions or impacts that the concept had on other
concepts, be able to calculate forward and back into or out of
the relevant formula, and finally (the test taking part) be able
to quickly pick out the imbedded error or limiting factor in each
the accompanying 'wrong' answers among the choices presented so
that you can pick that which is least or most likely to conform
to the issue or question presented.

See also CFA, FRM communities.

Continue reading "CFA mastery" »

Posted by omor at 12:43 PM