Skewness
Diversification is even better than a free lunch – study
Data back to 1926 shows that spreading bets brings higher returns as well as lower risk
The risk-reversal premium
We show that including risk reversals in an equity portfolio creates a better portfolio compared with a pure index position.
Severe but plausible – or not?
In this paper, the authors apply a measure of statistical unusualness, called the Mahalanobis distance, to assess the plausibility of the scenarios used in the Federal Reserve's stress tests.
A simple and robust approach for expected shortfall estimation
This paper proposes a simple and robust expected shortfall estimation method based on the tail-based normal approximation.
Is short vol taking the long count?
Short volatility players try to box clever after strategy’s Covid rout
Whales or minnows? Sizing up crowded trades
Strategies for measuring crowding in trades can help to avoid its effect, writes quant fund founder
The joint S&P 500/Vix smile calibration puzzle solved
SPX and Vix derivatives are modelled jointly in an arbitrage-free setting
Dark materials: how one academic is delving into data
David Hand shines a light on dark data and the dangers of distortion by absence
Risk premia strategies – Lessons learned for the future
After a difficult 2018, investors are increasingly wary of risk premia, concerned that factors leading to underperformance might be a recurring problem. Imene Moussa, executive director at UBS, clarifies this issue
Making Cornish–Fisher fit for risk measurement
In this paper, the authors develop a computational method to find a unique, corrected Cornish–Fisher distribution efficiently for a wide range of skewnesses and kurtoses.
Genetic algorithm-based portfolio optimization with higher moments in global stock markets
This paper investigates the distributional characteristics of stock market returns and analyzes the significance of higher moments.
Delta-hedged gains and risk-neutral moments
The authors investigate the underperformance of delta-hedged option portfolios in relation to ex ante moments of the stock market’s return distribution.
Giving the Omega ratio a new lease of life
Johnson-Omega could change the way financial firms measure portfolio performance
Does skewness matter to the pricing of commodity futures?
Paper designs and tests performance of new strategy in commodity futures
Tail risk premiums versus pure alpha
Tail-risk skewness, rather than volatility, is correlated with risk premiums
Non-linear momentum strategies
Non-linear momentum strategies
Cutting Edge introduction: Followers of fashion
Focusing on how often a trading strategy ends on the winning side can distract from the question of whether it profits on average. The key is in the return distribution’s skew – and at least for trend-following strategies this can be directly controlled…
Momentum trading: ’skews me
Momentum trading: ’skews me