Quant Finance

A convex strategy seems to better correspond to long-term investors in terms of preference structures, potentially ready to give up some of their earnings to avoid losses that would be difficult to handle from an emotional point of view...

It is the conclusion of a paper entitled «The Changing Role of Hedge Funds in the Global Economy » written by Dr. Everett Ehrlich. He would expect more state and local governments will make them part of the solution moving forward.

While complex finance should be preferred to improve risk modeling, it continues, in times of market stress, to help designing unmanageable and useless complex structured products

The statistical assumption of normal (log-normal) distribution of stock returns (prices) is not that strong and tail events’ occurrence is largely undervalued. Nevertheless, this modeling framework has been widely used for strong reasons.

The SEC is considering whether new requirements should be imposed on high frequency trading and what benefits market makers should get for meeting those obligations. In the meantime the CFTC moves forward to protect swaps user margin from peer default.