On July 27, 2017 the Financial Conduct Authority, the U.K.’s top regulator, tasked with overseeing Libor, announced the benchmark will be phased out by 2021. Alternative risk-free rates are being set up for the different currencies. For the US Dollar, the US Fed’s Alternative Reference Rates Committee (ARRC) has recommended …

Last month, institutionalinvestor.com reported that AI-powered hedge funds outperformed their peers, Hedge funds with artificial intelligence capabilities showed a huge competitive edge over investors that didn’t use AI, new research indicates. AI-led hedge funds produced cumulative returns of 34 percent in the three years through May, a report Tuesday from …

Convertible bonds are complex financial instruments. However, the accounting treatment for convertible bonds has been simplified. The Financial Accounting Standards Board (FASB) released new guidance last month on accounting for convertible instruments and contracts in an entity’s own equity… Convertible instruments are debt or equity instruments (or features) that either …

Executive stock options usually have complex payoffs. To price them, we often use the binomial tree method or Monte Carlo simulations. … a lattice model can be designed to accommodate dynamic assumptions of expected volatility and dividends over the option’s contractual term, and estimates of expected option exercise patterns during …

With a sudden increase in volatility during the pandemic, many volatility funds lost money. Many funds were struck because they adopted a strategy known as shorting volatility — betting that it will fall or remain low. Such funds sell derivative protection such as put options, which give the buyer the …

The trend in the increased holding of risky assets continues. Because of Covid-19, the big banks now hold more illiquid, opaque assets than before. Lenders including Barclays Plc, Citigroup Inc., BNP Paribas SA and Societe Generale SA reported a surge of more than 20% in their most opaque assets during …

Convertible bond issuance has increased during the Covid 19 pandemic. From a funding perspective, convertible bonds have many attractive features for corporates, which have become more important during the pandemic. …In volatile markets, the value of the embedded option in a convertible bond increases. The asset class also becomes more …

When constructing a portfolio, adding a low correlation, low Sharpe ratio strategy can have the same impact as adding a high Sharp ratio strategy. The low correlation strategy is a great diversifier. The core argument presented in this paper –that SR is a misleading index of whom a fund should …