INTRODUCTION The zero interest rate policy [ZIRP] is a monetary tool used by central banks to jump-start the engine of a slowing economy. By reducing the interest rate near to zero, central bank promotes greater leveraging to invest and boost asset prices. It is important to note that there are 2 types of interest rates;…
All the economist developed different yield curve theories to determine how and why the yield curve move in the way it’s moving. Right know there is 3 main theories that try to explain that movements: Pure expectation theory: one of the more straight forward among the three, the yield is calculated by (1+x)2 = (1+y)*(1+z).…
There are four main types of real estate investments that can be represented in two dimensions depending on the type of ownership and the type of market. The first group is described in terms of public or private markets. Usually in private markets the investors needs to invest directly, in other words the investor will…
Efficient market hypothesis, anomalies and lessons learnt after the financial crisis.
As counter-intuitive as it may seem, the luxury industry and iconic companies such as LVMH, Hermes and the Richemont group recorded strong performance during the 2007-08 financial crisis. To simplify their activities – and perhaps strip them out of their hard earned experience, know-how, glamorous appeal and subsequent prestige- these groups sell goods at a…
This are some curiosities about globalization that you may do not know. As of today, do more people in the world live in cities or in the countryside? People will conclude that of course there are more people living in the city. However, that’s only true since 2009 when the trend changed. People is agglomerating…
The main asset allocation decision in any portfolio is how much to invest in equities and how much in bonds. These two asset classes have a very different risk /return profile, so the decision should mainly depend on your risk tolerance and time horizon, however, risk and expected returns are also very important factors. The…
Option traders use put-call parity as a simple test for European style option price model. If the parity doesn’t hold, then there is a mispricing somewhere, and investors can profit from it without taking on any risk (arbitrage opportunity). So how does put-call parity work? Let us take in consideration a portfolio composed of a…
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