Hi all,A quick question: When you calculate the VaR of a fixed income derivatives portfolio by using ZC rate or market rate, is the VaR ZC< VaR MR? or the contrary. And why?Thanks for your help, fellas.Phileas

<t>QuoteOriginally posted by: NStat Arb is not based on theoretical, exact pricing relationships but rather on empirical, statistically established relationships. Stab artb in fixed income are concentrated in derivatives (options and futures, volatility).PhileasWhy is not Statistical Arg based on th...

Relative Implied Volatility Arbitrage

<t>QuoteOriginally posted by: cksh2005QuoteOriginally posted by: PhileasStat Arb is not based on theoretical, exact pricing relationships but rather on empirical, statistically established relationships. Stab artb in fixed income are concentrated in derivatives (options and futures, volatility).Hope...

Stat Arb is not based on theoretical, exact pricing relationships but rather on empirical, statistically established relationships. Stab artb in fixed income are concentrated in derivatives (options and futures, volatility).Hope it helps

<t>QuoteOriginally posted by: cksh2005For interest rate process, the rate setting process (at least for FED, ECB, BOJ) is itself a mean reverting process - when economy heats up, central banks hike rate, and cut it when things look down. The rest of the economy bears a highly correlation to the yiel...

erstwhile,I could not agree more about your statement on vols and herd instinct. You rock, man!

<t>QuoteOriginally posted by: erstwhileah yes - recent vol levls - a topic of many beers!my take on it is this: low interest rates have caused people to search for yield. yield hungry people only get yield one way: taking risk. a common way to take risk is to write options. this was discussed in dep...

<t>what is really important is the mathematical expectation Mathematical expectation is the amount you expect to make or lose, on average, each bet You are better off not to trade unless there is absolutely overwhelming evidence that the market system you are contemplating trading will be profitable...

<t>I do agree with erstwhile.People could find some "near arbitrage" is most likely to occur with derivatives assets.As you mentioned many times (I am not an expert in this stuff) the arbitrage is nothing more than a directional bet and your point on the Convertible arbitrage is bulletproof.You know...

<t>In pure arbitrage, you invest no money, take no risk and walk away with sure profits.You categorize arbitrage in the real world into 3 groups:1) Pure arbitrage: where in fact you risk nothing ans earn more than the riskless rate.2)Near arbitrage: where you have assets that have identical or almos...

<t>Thanks Donyoshi,I dont think its possible just to specify the inherent leverage of a fund without stating a shift in the underlying.I completely agree that leverage is a useless measure but unfortunately it is widely used...and to be honest i can't understand how this type of measure could be one...

Hi all,I do have a quick and a simple question. How do u measure the leverage for an arbitrage fixed income porfolio using only swap. The porfolio does not have any outright position (duration neutral), only relative value trade. Any formula?Thanks