The Epidemiology of Volatility Transmission: Part 2

The Epidemiology of Volatility Transmission: Part 2

What is volatility? The word has a noble origin. The Latin volatilis has several meanings, included winged, flying, swift, and fleeting and is derived from the verb volare, to fly. In modern English, the word volatility is also concerned with movement, variation and risk. In science, an everyday word can be expropriated and given a very precise meaning. Finance is no different.

Have You Got It All Wrong?

Have You Got It All Wrong?

Have You Got It All Wrong?In the sports world, the team that scores the most points, wins. One could also reverse the coin, and say that the team that gives up the fewest points wins. From a fan’s point of view, the focus is usually on the former (offense) and not the...

More of the Same

More of the Same

The election is over, a vaccine may be on its way and the world appears to believe that a return to pre-pandemic life may be imminent. What if?

Volatility – Stylized Facts

Volatility – Stylized Facts

There are a handful of stylized facts about asset price volatility. (A stylized fact is a term widely used in economics that refer to empirical findings that are so consistent — for example, across a wide range of instruments, markets and time periods — that they are accepted as truth). In summary, here are five stylized facts about Volatility:

  • Volatility Exhibits Persistence;
  • Volatility Varies Over Time. The truths that volatility persists and volatility varies are not inconsistent or contradictory b/c VOL is market regime dependent.
  • Volatility has a Half-Life. A “half-life” of volatility is defined as the time taken for an asset’s volatility to move halfway back towards its unconditional mean or average level.
  • Volatility is Mean-Reverting;
  • Volatility News is Self-Reinforcing. Negative news sentiment is one source of heightened volatility levels.
The Alternative Imperative

The Alternative Imperative

In this 7½ minute video, AllAboutAlpha’s content editor, Aaron Filbeck of CAIA, interviews Rick Roche on his two-part series on Alternative Investment Data (aka Alt-Data). Although Alternative investment data has received a lot of press coverage in the last 5-7 years, it’s only a fraction of the annual spend on financial market data. However, with an increasing number of PMs and analysts using machine learning tools, the growth rate and uptake of Alt-Data is very impressive. Rick also addresses the false dichotomy of an “Unattainable Triangle” (fast, good or cheap). Rick believes that traditional market data can be combined with Alt-Data and human intelligence to seek alternative and uncorrelated sources of alpha.

Volatility Trading in the COVID-19 Era: Shaken not Stirred

Volatility Trading in the COVID-19 Era: Shaken not Stirred

In 2020, the U.S. and global equity markets have been shaken by Virus and Volatility. The year has been dominated by a global pandemic, trade wars, civil unrest and a hotly contested U.S. presidential election. Each one is enough to heighten volatility, but all together they translate to turbulent markets that are not just stirred, but violently shaken.

Election Volatility

Election Volatility

Expectations of increasing near-term volatility leading up to this year’s election stands in stark contrast to that of 2016. Making things more curious, the yield-curve points to an expectation of a calming trend following the election.

The Alternative Imperative, Part 1

The Alternative Imperative, Part 1

Part 1 of a two-part series on Alternative Investment Data (Alt-Data) in the COVID Era. In Part 1, the author makes the case for high-frequency, short-interval Alt-Data while discussing three primary drawbacks of interpreting official economic statistics amid a global pandemic.

Insurance Dedicated Funds: How to Beat Performance Drag

Insurance Dedicated Funds: How to Beat Performance Drag

This article explores the utility and potential use of an insurance dedicated fund (IDF) as an essential yet underutilized investment vehicle to improve portfolios’ overall tax-efficiency. For decades, high-net-worth and ultrahigh-net-worth taxpayers and their advisors have utilized insurance wrappers for legitimate insurance, wealth creation, and tax- and estate-planning purposes. Over the past three-plus decades, IDFs have withstood the tests of time and Internal Revenue Service (IRS) scrutiny.

How to Invest in VIX ETFs

How to Invest in VIX ETFs

If you’re interested in buying VIX ETFs, consider the pros, cons and alternatives. Learn all about it from Little Harbor Advisors’ own Jeff Landle

Quants’ Quandary: Crossing the Chasm

Quants’ Quandary: Crossing the Chasm

In a series of five installments, Rick Roche will explore and analyze the acceptance and diffusion of quantative investment management. Mr. Roche upends widely-held, assumptions and media assertions of widespread quant investing. The author documents that a surprisingly small sum of individuals and institutional dollars has been allocated to quant strategists.