In some fairly routine middle-critter corporate roles, there may no longer be much need for human managerial involvement. Enter the self-running business entity: another big step toward the obsolescence of human beings some of whom, nonetheless, will get wealthy in the process.
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Three authors at EDHEC propose a two-step modeling process for the valuation of certain infrastructure debt. One of the key ideas they incorporate is the value of the step-in rights that come when the issuers violate a covenant or otherwise find themselves in technical default.
The trade cycle is not a central concern of the reigning general-equilibrium models in macroeconomics. To the extent such models do consider booms and busts, they largely reject money or credit based explanations.
The Greek prime minister's surrender to Germany and the troika has alienated much of his own base in Syriza. You can bet on it. Indeed, finding creative ways to bet on it looks like a sound alpha strategy now.
Commenters successful pressed for certain changes in this massive new rule during its years of gestation. For example, the rule incorporates a T + 24 approach for the reporting of block trades. But warned, though, blizzards in NYC don't stop the ticking of that 24 hour clock.
For one professor, the surprising divergence in the prices of WTI/Brent crude in the period 2010-2012 was a case study in how commodity prices can teach us about supply chain conditions. Faille looks back at his article, and forward past today's calmer but still-fluctuating spread.
To the extent that high-frequency trading is analogized to 'insider trading,' it may be in trouble with securities regulators but still in the clear with commodities regulators. After all, the latter do allow hedgers to use non-public material information to protect themselves. But Gregory Scopino doesn't believe pinging and related HFT practices should be in the clear with the CFTC at all.
A new report from Eurekahedge tries to go beyond some obvious observations about the performance of hedge funds there in 2014, or about the performance of that country's broad economy last year. Eurekahedge talked to seven experts in the field. They took quite different views on the most basic of questions. So different that a contrarian would have a tough time finding the consensus to counter.
The hedge fund universe has become a much more complicated place since 2008. The old-school hedge funds offering only quarterly redemptions with at least one month notice are no longer the only option for those seeking alternatives plays. And those who are seeking such plays may be somewhat confused by the proliferation of possibilities.
Reuters is now reporting that major investors seek the opportunity to convert their voting shares of Twenty-First Century Fox into non-voting shares, because the voting shares are trading at a discount. Faille takes Reuters' anonymous sources at their words for the purposes of discussion. He doesn't think these investors will get their convertibility.
Regular readers of AllAboutAlpha know that Bayesianism, a movement with the world of probability and statistics, has a good deal to do with contemporary pricing models and portfolio theory. It also has foes in that world, the frequentists, and a 2012 cartoon, recently raised to salience again by a Facebook post, has given those frequentists reason to gripe about Bayesian smugness.
Is it possible for a country (let us not name names) currently employing the euro to introduce or re-introduce a fiat national currency with a variable exchange rate vis-à-vis the euro and without either a forced conversion of savings or catastrophe? Faille speculates on an approach.
William Browder's new book, Red Notice, is a fascinating window into the recent history of Russia, both when Yeltsin (and at first Putin) welcomed foreign investment and then when things turned very ugly for those investors.
A physicist recently suggested that exchanges might do well to change the nature of the trading they host, holding batch auctions every one-hundredth of a second to better serve their real economic functions. Then a commenter proposed that taxation could achieve the same effect. Our physicist went back to the drawing board to consider this.
Out of the 31 banks surveyed by the Basel Committee for its latest progress report on risk data aggregation, 45% reported that they will not be in compliance with the Basel demands by the deadline, a year from now. But surely there is a profit opportunity in here for someone.
The first of the three patents cited by the plaintiffs was filed at a time when the crowdfunding exemption movement was making a fair amount of noise on Capitol Hill, though it had not yet had tangible success. One might already entertain certain suspicions.
Unfortunately, Gallagher and Grundfest aren't simply contributing to the on-going debate over shareholder activism, classified boards, etc. They're trying to stifle it by suggesting a litigation campaign against the side they oppose. Shame on them.
There are certain deals that banks don't want to touch with the longest lance in a joust. That doesn't mean the deals don't get done: it means they go by default to the non-bank financiers. We look at the divide.
As the CEO of AIMA, Jack Inglis, said: Many pension-fund trustees "are asking questions about their existing or prospective hedge fund allocations. Rarely has there been such demand for a realistic assessment of the benefits – and also the risks – associated with hedge fund investing.” The AIMA and CAIA are working together to meet that demand in a series of papers.
Varoufakis believes in the single Eurozone currency. It is unlikely that the government that just appointed him Finance Minister plans to pull out of that zone and bring back the drachma.
In a fascinating review article, Sannikov and his co-authors distinguished among the sorts of liquidity, and thus identified the precise sort of liquidity mismatch likely to lead to market shocks. In a working paper last year, Sannikov took on the issue of executive pay, incentives, and claw-backs.
A legal donnybrook has begun for control of Caesar's assets. An important side issue involves bankruptcy court treatment of non-debtors seeking release from alleged liabilities of their own, and a split amongst the appeals court circuits over such treatment.
Eurekahedge tells us that hedge funds were in the black 4.57% in 2014. That's hardly cause for celebration, since the MSCI World Index returned 6.79% over the same year. But all eyes now turn to the still-sliding price of oil.
Most efforts to introduce "entropy" into finance have seen it as a quantity to be minimized. A new paper, which begins as an effort to explain barbell portfolios, uses entropy in a different manner. Unfortunately, it doesn't really end up clarifying those barbells.
An SNB announcement caused wild market moves Jan. 15th, not only in Forex but in commodity and equity prices as well. In the wake of the commotion, one key question has to be: why the announcement? Why this sudden change in the policy of Switzerland's central bankers?
A new paper by a senior market economist at BNP Paribas celebrates the invention of Learning Vector Quantization (LVQ), a machine-learning algorithm that could enable some smart economists to get very rich indeed.
Sprecher proposes that the exchanges and the investment banks enter into a deal, and that regulators confirm it by various tweaks in the NMS. The whole dynamic that the "grand bargain" represents is a disturing one, old-fashioned smoke-filled-room cronyism.
The publisher of Laissez-Faire Books has made some news in the alternative-currency world, declaring that there is a “silver lining” to the various scams associated with such currencies, because cons tend to develop around industries with a bright future. That sounds like a bit of a stretch.
A new paper by Eric Falkenstein discusses an old question: the reason for the high risk-adjusted return in low-risk equities, and the adjustments it requires in CAPM. This is no fleeting oddity, but a lasting characteristic of markets. In econo-speak, not only the existence but the persistence of the anomaly requires explanation.
The newly called snap elections in Greece will serve as a contest between pro-austerity and anti-austerity forces. Anti-austerity means abandoning the bail-out deal, and that position now seems the likely victor.
The Permal Group takes a refreshingly modest view of the eventual impact of Big Data on the business model of hedge fund managers. The better the data about a corporation, the more accurate the stress testing. Yes, that seems reasonable.
In the middle of the year now ending, the U.S. Supreme Court delivered as complete a victory as it could manage to the hold-out bondholders in the Argentine-default dispute. Enforcement efforts plod on, and it seems likely a related story could make our top five list next year, too.
A December 15 opinion by the SEC limits the significance of a Supreme Court decision of three years ago, and so at least pending appeal it broadens the applicability of the basic anti-fraud rule 10b-5 to the employees of an investment adviser.
In Part One Faille discussed the Newman/Chiasson decision of a three-judge panel of the appeals court. In this follow-up, he discussed consequences, starting (but not ending) with the good news this offers Michael Steinberg.
The success of Wynn's lawsuit would have chilled free speech by short sellers. So let us take a moment to celebrate its quick demise at the hands of Judge Orrick. As a general rule, though, when a plaintiff quotes an expression from a transcript that, in fact, is immediately preceded by the word "not," and the plaintiff leaves the "not" out of the quote ... things are knotty.
Two World Bank economists review the impediments that face the growth of the sukuk market, impediments often inherent in the theological precepts that gave rise to it. Part of the solution: well-functioning money markets as a context for sukuk issuance.
The new survey from Natixis tells us that a lot of asset-managing institutions think their industry as a whole has been quite slow about moving in the direction of liability-driven investment strategies. Also, more than half believe traditional assets are too correlated to provide them with the diversification they need.
A three-judge panel of the appeals court instructed the district court to "dismiss the indictment with prejudice as it pertains to Newman and Chiasson." Here we discuss why. in the second part, we'll discuss the likely consequences.
Observers of the slow slog toward an empirical test of larger tick sizes have raised concerns about the details of the three-track plan under consideration. In particular, there's an order-protection feature for one of the three "tracks" that has raised the hackles of Larry Tabb and the STA
The royal family in Qatar, the House of Thani, just took direct control of the emirate's sovereign wealth fund. Also, that fund just invested big in Uber, confirming its reputation as perhaps the worlds most aggressive deal-hunting institution.
A proposed new set of principles, designed to encourage investors in the alt-investment industry in their discussions with their managements, encourages skepticism both about side-pocketed assets and about other investors' sweetheart deals (i.e. "side letters.")
The price of gold took a swan dive as November ended, just as Swiss voters formally nixed an initiative that would have required the central bank to buy a lot of the stuff. Faille argues that this is not a matter of cause and effect. It is, on the other hand, a fascinating case study in the discounting machinery that is a market.
A regime switching model may treat a high-volatility environment as one “regime,” and a low-vol environment as its successor regime. The idea, as it applies to risk management, then, is simply to be ready in either setting for the switch to the other. This is both playing defense and playing offense. It is both managing risk and pursuing alpha.
Only two hedge fund strategies performed in the positive numbers in October, the rest were all in the red. Managed futures did best, according to the Eurekahedge numbers, benefitting from their short positions on oil prices.
A report focuses on the life and spending habits of the 211,275 wealthiest individuals on the planet, and their network of family and friends.
Alan Rechtschaffen quotes two definitions of "moral hazard" in this book. The first, from Ben Bernanke, seems to get the book off to a rather awkward start. The second, from Zachary Gubler much later on, represents something of a recovery.
According to a new report from Intralinks and Cass Business School, M&A activity is a critical component in how successful companies innovate and enhance shareholder value. Actavis' latest coup, rescuing Allergan from the clutches of Valeant and Pershing Square, may make the report's authors' point more vividly than their dry numbers can.
Big Data makes possible new ranges of inferences, and gives value to new skill sets. There will continue to be plenty of roles for human beings in recognizing the shadows cast by the intense light emitted by new technologies.
The release of Lord Grabiner's report provides evidence going well beyond the conclusions that Grabiner himself is willing to draw, and shows a central bank acting as a wink-and-nod clearing house.
A bitcoin-mining fire, a survey of small and medium businesses and their levels of preparedness for bitcoin customers, and a new criminal accusation against an alleged ponzi scheme: all conribute to the sense that bitcoin is a microcosm of the whole financial world, good and bad.