Blog Posts

The role of money supply in the economy is a hotly debated topic among economists, with its relationship to inflation being particularly controversial. The traditional perspective suggests that an increase in money supply leads to inflation, while a transactions-based approach argues that it is the level of spending that primarily influences inflation. The complexity of […]

Stochastic Discount Factor (SDF) models are central to financial economics, as they provide a unified framework for understanding asset pricing. These models, also known as pricing kernel models, are based on the concept that the price of an asset is the present value of its future payoffs, discounted by a stochastic process.   Key Takeaways […]

The 2010 Flash Crash was a significant market crash that occurred on May 6, 2010. It was characterized by the rapid decline and recovery of stock and commodity prices over a very short period.   Key Takeaways – 2010 Flash Crash Causes High-Frequency Trading (HFT) Impact Rapid, automated trading by HFT algorithms exacerbated the crash. […]

Pegged orders are a type of order used in trading that automatically adjusts its price based on certain market conditions. These orders are designed to provide traders with more strategic control over their trades, so they remain competitive in changing markets. There are various types of pegged orders, each with its unique features and applications. […]

Liquidity models are used in trading by assessing the ease with which assets can be bought or sold in the market without affecting their price. These are several key concepts and liquidity model types that are important for traders, investors, and policymakers to understand – especially for traders who may impact markets with the sizes […]

Swap pricing models are used in the financial industry for valuing and managing interest rate swaps, currency swaps, commodity swaps, and other types of swaps. These models help determine the fair value of swaps, which are agreements between two parties to exchange cash flows based on specified variables. The complexity of swap contracts, which may […]

Roll yield is a concept in the commodities and futures market that can significantly impact the returns of futures trading strategies. It arises from the shifting structure of futures prices over time. To grasp roll yield, one must first understand the futures market and the concept of contango and backwardation.   Key Takeaways – Roll […]

Quantitative trading and investing represent a field in finance that leverage mathematical and statistical modeling to make decisions in the financial markets. These approaches are typically algorithm-driven and are often based on historical data or “expert system” programming, reducing human bias and emotions from the decision-making process. Due to their reliance on advanced models and […]

Correlation trading models are quantitative models that take advantage of the statistical relationships between the movements of two or more financial assets. These models are based on the principle that the price movements of different assets can be related in a predictable manner. Correlation trading strategies can be applied across various asset classes including equities, […]

Regime-switching models are statistical models that account for structural changes in economic relationships over time. These changes are often driven by shifts in policy, economic conditions (e.g., low inflation to high inflation), or other external factors (e.g., geopolitical conflict). This leads to different “regimes” or periods within the data that exhibit distinct statistical properties. These […]