Posts Tagged ‘leverage

20
Aug
11

Fun & Finance: #13, Charla sobre Opciones

En este episodio, Gaston empieza a trabajar con opciones y Leo le da una mano explicándole -de forma introductoria- de que tratan. Y para el final, le cuenta de una estrategia utilizada mucho en Argentina.

Siempre mejor en HD.

No se olviden de LIKE THIS !!

09
Jun
11

Paper: No aprendes más

THIS TIME IS THE SAME: USING BANK PERFORMANCE IN 1998 TO EXPLAIN BANK PERFORMANCE DURING THE RECENT FINANCIAL CRISIS

We investigate whether a bank’s performance during the 1998 crisis, which was viewed at the time as the most dramatic crisis since the Great Depression, predicts its performance during the recent financial crisis. One hypothesis is that a bank that has an especially poor experience in a crisis learns and adapts, so that it performs better in the next crisis. Another hypothesis is that a bank’s poor experience in a crisis is tied to aspects of its business model that are persistent, so that its past performance during one crisis forecasts poor performance during another crisis. We show that banks that performed worse during the 1998 crisis did so as well during the recent financial crisis. This effect is economically important. In particular, it is economically as important as the leverage of banks before the start of the crisis. The result cannot be attributed to banks having the same chief executive in both crises. Banks that relied more on short-term funding, had more leverage, and grew more are more likely to be banks that performed poorly in both crises.

Link al Paper

11
May
11

Fun & Finance: capítulo 8, ETFs

En este capitulo, aparece nuevamente Marco explicandole -en esta ocación a Gaston- que son los ETFs.

Para un mayor disfrute de este video, le recomendamos que lo vea desde Vimeo directamente en Alta Definición

01
Oct
10

Gráfico du Jour: Prop trading post crisis

(Fuente: International Securities Lending Association, via FT Alphaville)

15
Aug
10

Paper: Hedge Fund Leverage

Hedge Fund Leverage

Abstract:
We investigate the leverage of hedge funds using both time-series and cross-sectional analysis. Hedge fund leverage is counter-cyclical to the leverage of listed financial intermediaries and decreases prior to the start of the financial crisis in mid-2007. Hedge fund leverage is lowest in early 2009 when the leverage of investment banks is highest. Changes in hedge fund leverage tend to be more predictable by economy-wide factors than by fund-specific characteristics. In particular, decreases in funding costs and increases in market values forecast increases in hedge fund leverage. Decreases in fund return volatilities also increase leverage.

Link al Paper

23
Jun
10

un poquito de leverage…

CSS Analytics tiene un post donde muestra la relación entre fundamentals y análisis técnico vía el Efecto Apalancamiento.

The “leverage effect”  and subsequent theory originated from early studies done by Fisher Black (of Black-Scholes fame). Black  found  that stock volatility tended to rise when stock prices went down and that volatility fell when prices went up. The economic rationale behind this effect is rooted in the firm’s capital structure. As a stock rises, the percentage of equity to debt rises, and the firm becomes less risky since the debt holders claims to the company value are more limited. Conversely, as the stock falls, the percentage of equity to debt falls, and the increased share of debt holder claims make the firm’s equity more risky. Thus a falling stock price should lead to an increase in future volatility.

(…)

Well most educated finance students understand first of all the principle of balance sheet leverage: when you add debt to the balance sheet, a given % increase in sales has a disproportionately larger increase in the % increase in earnings because you are netting out a fixed interest cost. If we all agree that 1) the market tends to discount future GDP and hence revenues, and 2) that firm value is also a function of earnings growth and total earnings, then the firms that will experience the greatest percentage change in firm value when the market forecasts a recovery should mathematically be the most leveraged firms.

This affects the technical trader in many ways whether you trade short-term or not. It means that the biggest winning stocks will have strong velocity relative to volatility (think sharpe ratio) only while the market is rising. When the market peaks, in fact, their velocity relative to volatility will have peaked at extraordinary levels. At this point the firm’s debt to equity is often at unsustainable  levels–leaving it vulnerable to the largest proportionate changes in firm leverage–and hence future volatility/downside risk.

21
Jun
10

Paper: spread como proxy de riesgo

Is There a Distress Risk Anomaly? Corporate Bond Spread as a Proxy for Default Risk

Abstract:
Although financial theory suggests a positive relationship between default risk and equity returns, recent empirical papers find anomalously low returns for stocks with high probabilities of default. The authors show that returns to distressed stocks previously documented are really an amalgamation of anomalies associated with three stock characteristics — leverage, volatility and profitability. In this paper they use a market based measure — corporate credit spreads — to proxy for default risk. Unlike previously used measures that proxy for a firm’s real-world probability of default, credit spreads proxy for a risk-adjusted (or a risk-neutral) probability of default and thereby explicitly account for the systematic component of distress risk. The authors show that credit spreads predict corporate defaults better than previously used measures, such as, bond ratings, accounting variables and structural model parameters. They do not find default risk to be significantly priced in the cross-section of equity returns. There is also no evidence of firms with high default risk delivering anomalously low returns.

Link al Paper




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