Volume 7, Number 2, Second Quarter 2009 Enough. True Measures of Money, Business and Life John C. Bogle Reviewed by Bruce Grantier View PDF… Read more
Second Quarter (2009)
CASE STUDIES: The Liquidation of Amaranth
George Chacko and Scott Thomas Volume 7, Number 2, Second Quarter 2009 View PDF… Read more
SURVEYS AND CROSSOVERS: Dealing With Dimension: Option Pricing on Factor Trees
Sanjiv R. Das and Brian Granger Volume 7, Number 2, Second Quarter 2009 We present a scheme for pricing derivatives on M assets on K -factor recombining trees with N periods. The computational complexity of these trees is O(NK +1), i.e. polynomial in N, making it possible to price a wide range of derivatives without… Read more
The Value Spread as a Market Timing Signal: Evidence from Asia
Charles E. Hyde and Michael P. Triguboff Volume 7, Number 2, Second Quarter 2009 Using monthly data from 1992-2006, we show the value premium in Asia ex Japan is positively related to the cross-sectional dispersion of four common value ratios. The book-to-price and cash flow-to-price spreads exhibit the strongest relationship. Typical month-to-month variation in these… Read more
A Simple Model for Time-Varying Expected Returns on the S&P 500 Index
James S. Doran, Ehud I. Ronn and Robert S. Goldberg Volume 7, Number 2, Second Quarter 2009 This paper presents a parsimonious, implementable model for the estimation of the short and long-term expected rates of return on the S&P 500 stock market Index. Sufficient statistics for the expected return on the S&P 500 Index consist… Read more
A Structural Analysis of the Default Swap Market – Part II (Relative Value)
Lisa Goldberg, Rajnish Kamat and Jason Kremer Volume 7, Number 2, Second Quarter 2009 We evaluate several long/short strategies for managing a portfolio of default swaps. The strategies are based on a ranking of credits by residuals, which are the differences between market spreads and spreads generated by the iSpread structural model. Investment grade portfolios… Read more
Liquidity Risk and Limited Arbitrage: Are Taxpayers Helping Hedge Funds Get Rich?
Evan Gatev Volume 7, Number 2, Second Quarter 2009 Hedge funds facing capital constraints during market-wide liquidity shocks use bank credit lines to reduce the limits to arbitrage. During shocks, government-protected bank deposits receive inflows and this exclusive low cost funding enables banks to lend to hedge funds. In effect, banks compete away the government… Read more