Covariance Risk Premium as a Predictor of Market Returns

Posted on December 9, 2023 By Harbourfront Technologies

Various prediction methods are employed in the stock market, leveraging diverse techniques and data sources. Fundamental analysis delves into a company’s financial health, examining factors like earnings, assets, and management. Machine learning and artificial intelligence have gained prominence recently, using algorithms to analyze vast datasets and identify patterns elusive to …

How Hedging Frequency and Volatility Affect Profit and Loss

Posted on December 5, 2023 By Harbourfront Technologies

Delta hedging is a risk management strategy widely used in financial markets, particularly in options trading. The primary objective of delta hedging is to offset or neutralize the directional risk, or delta exposure, associated with an options position. Delta represents the sensitivity of an option’s price to changes in the …

Using a Parametric Implied Volatility Surface for Calculating Value At Risk

Posted on December 1, 2023 By Harbourfront Technologies

Value at Risk (VaR) is a widely used risk metric in finance, providing an estimate of the potential loss on a portfolio or investment over a specific time horizon, under normal market conditions. It quantifies the level of financial risk within a certain confidence interval, expressing the maximum loss that …

Does Kelly Portfolio Outperform the Market?

Posted on November 27, 2023 By Harbourfront Technologies

Position sizing is a critical element in effective portfolio management, playing a pivotal role in determining the overall risk and return characteristics of an investment portfolio. Proper position sizing involves allocating an appropriate proportion of capital to each investment, considering factors such as the investor’s risk tolerance, investment goals, and …

Decomposing Volatility into Idiosyncratic and Systematic Components

Posted on November 23, 2023 By Harbourfront Technologies

Volatility refers to the degree of variation of a trading price series over time. It is a statistical measure of the dispersion of returns for a given security or market index. High volatility indicates a greater potential for significant price swings, both upward and downward, while low volatility suggests a …

Improved Martingale Betting System- Does It Work?

Posted on November 19, 2023 By Harbourfront Technologies

The martingale betting system is a popular gambling strategy that involves doubling one’s wager after each loss in the pursuit of recovering previous losses and securing a profit equal to the original bet. The underlying idea is that, statistically, a win will eventually occur, allowing the player to recoup losses …

Investment Strategy Diversification: What Works and What Does Not

Posted on November 15, 2023 By Harbourfront Technologies

Diversification is a fundamental strategy aimed at managing risk by spreading investments across different asset classes, industries, or geographic regions. The core principle is to avoid putting all eggs in one basket, reducing the impact of poor performance in a particular investment on the overall portfolio. By holding a variety …

How Volatility and Commodity ETFs Impact the Markets

Posted on November 11, 2023 By Harbourfront Technologies

Exchange Traded Funds (ETFs) have undeniably transformed the financial industry, providing investors with unprecedented ease of access to diverse portfolios. However, their impact on the market isn’t uniformly positive. The surge in ETF popularity has raised concerns about potential distortions and increased market fragility. Critics argue that the sheer size …

How Long Do Grantees Hold Onto Their ESOs?

Posted on November 7, 2023 By Harbourfront Technologies

Employee stock options (ESOs) are a compensation tool offered by companies to their employees, granting them the right to purchase shares of the company’s stock at a predetermined price. ESOs serve as incentives for employees, aligning their interests with the company’s success and long-term growth. Typically, these options have a …

Incorporating Volume into Volatility Forecasting

Posted on November 3, 2023 By Harbourfront Technologies

Volatility forecasting plays an important role in finance. Its importance lies in the fact that it enables us to effectively price options and plan trading and hedging activities. By providing insights into future market volatility, this forecasting becomes an essential tool for investors, enabling them to make informed decisions that …