New answers tagged risk
1
When people say OIS swap they mean an exchange of some sort of fixed cash flow and in return the receipt of daily OIS based on the "Fed Effective Rate" (FEDL01 Index on Bloomberg).
The floating side is always fed effective daily (ACT/360). The fixed side can be any schedule you want, but the default I think is ACT/360 (money market).
The PV of the ...
0
DV01 is non-linear.
There are a few ways you could do this:
Regress your bond portfolio returns (if long enough, if not synthetically extend back using current weights and the returns on those assets) on factors that you can trade.
Eg: Mkt (S&P 500), Credit (Some tradeable index via etf or other source), ..., etc
Trade the weighted combination of ...
2
This one is far from straight-forward, although bear with me. It is possible to infer from first principles an ERP reasonably close to normative consensus expectations.
The attached from Howard Marks at Oaktree is a classic: "Everything you wanted to know about the equity risk premium (and much more)". The simple point is that there are four different ...
1
This one is gloriously semantic. The critical bit is adding the qualifying words "abnormal" and "risk-adjusted".
Imagine for example's sake a market stylized by two groups of stocks: debt-heavy telecoms companies, and cash-rich tech companies. A change in credit spreads will obviously work to the relative benefit of one group, and to the relative cost of ...
1
Good question. It isn't so common that the volatilities are recalculated based on estimated drifts, it is more about adjusting for those drifts as time goes on. It also depends on how actively you manage your portfolio and how much money is at stake. Portfolios are rebalanced in a few different ways:
Calendar based rebalancing is where the portfolio is ...
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