We explore from a theoretical and an empirical perspective the value of convexity in the US Treasury market. We present a quasi-model-agnostic approach that is rooted in the existence of some affine model capable of recovering with good accuracy the market yield curve and covariance matrix. As...

Different authors find optically very different patterns (‘tents' and ‘bats') when excess returns from US Treasuries are regressed against forward rates. A separate source of disagreement is whether the recent tent-shaped factor found by Cochrane and Piazzesi is fundamentally different from...

We propose a method to integrate frequentist and subjective probabilities in order to obtain a coherent asset allocation in the presence of stress events. Our working assumption is that in normal market asset returns are sufficiently regular for frequentist statistical techniques to identify...

In this note I concisely present the main arguments advanced in "Taking Liberties" (2012). In particular, I look at the philosophical roots of libertarian paternalism. I examine whether the claims that it constitutes the "real Third Way" and that it always should be preferred to 'harder' forms...

Does the selection of a specific interest rate model to use for pricing, hedging, and risk-return analysis depend upon whether the user is a buy-side institution or a sell-side dealer bank? Sanjay Nawalkha and Riccardo Rebonato debate this question in this paper and provide some insightful...

We propose a method to integrate frequentist and subjective probabilities in order to obtain a coherent asset allocation in the presence of stress events. Our working assumption is that in normal market asset returns are sufficiently regular for frequentist statistical techniques to identify...

Today's top financial-risk professionals have come to rely on ever-more sophisticated mathematics in their attempts to come to grips with financial risk. But this excessive reliance on quantitative precision is misleading--and it puts us all at risk. This is the case that Riccardo Rebonato makes...

We propose a method to integrate frequentist and subjective probabilities in order to obtain a coherent asset allocation in the presence of stress events. Our working assumption is that in normal market asset returns are sufficiently regular for frequentist statistical techniques to identify...

This paper presents a simple reformulation of the restricted Cieslak and Povala (2010) return-predicting factor which retains by construction exactly the same (impressive) explanatory power as the original one, but affords an alternative and attractive interpretation. What determines the future...

We look at the dependence of the magnitude of rate moves on the level of rates, and we find a universal relationship that holds across currencies and over a very extended period of time (almost 50 years). For the very low level of rates, we find a proportional behaviour; for rates of an...