Chrilly's Selected Working Papers

Below is a list of working papers. The list is ordered chronological. Latest papers first.
The recurrent theme of the working papers is the term-structure of volatility. Either by trading the term-structure directly or using the term-structure as a trading signal. But there are also a host of other topics.
The papers are a work in progress. The main purpose is to document for myself what I have done. There are usually several revisions if either the original ideas are tested on more recent data or new ideas are explored.
Chrilly produces working papers with almost the frequency of Paul Erdoes. Keep an eye on this page for revised versions of older papers and new ones.

  1. Approximating the Implied Volatility of SPX-Options with the VIX
    Data-collections of SPX options are not for free and sometimes also cumbersome to handle if one wants to be up-to-date. This working paper shows that the implied volatility and hence the price of SPX-options can be easily approximated with the VIX. The approximation works reasonable well for backtesting simple short- and mid-term SPX-option strategies.
    Delta-Table-I, Strike-Table-I
    Delta-Table-II, Strike-Table-II
    Delta-Table-III, Strike-Table-III
  2. Modeling, Forecasting and Trading the Crude Oil Term Structure
    Barunik and Malinska apply the bond term-structure forecasting model of Diebold and Li to crude oil Futures. But they report only statistical results and do not apply the model to trading calendar spreads. This paper addresses this logical next step. The performance is compared to strategies which are based on different rolling-strategies. Basically one shorts a less efficient rolling-strategy and goes a more efficient long. Both methods boil down to similar trading behavior and have hence also a comparable performance. The performance is in the time range from 2011-01-01 till 2016-11-18 quite reasonable.
  3. Building a Portfolio of ETFs to exploit negative Autocorrelation
    There are now several ETFs available which act as a fund of funds. The performance of these ETFs is rather mixed. This working paper presents a simple approach for a small universe of large ETFs. The strategy exploits the negative Autocorrelation of monthly returns and updates the weights accordingly. It beats significantly an equal weighted portfolio and also the best performing ETF of the universe. The performance can be increased further if one lifts the long-only constraint. The result is robust to different parameter settings and realistic trading costs. The presented strategy belongs to the Smart-Beta family.
  4. Improving Smart Beta ETFs with Smart Beta. Revision 1
    In a previous working paper I analyzed the performance of pairs-trading from a universe of ETF stocks. This paper uses a similar approach but considers long-only strategies which belong to the general group of smart beta strategies: Alternative weighting schemes of the stocks and subset selection according to volatility, beta or momentum. One selects a smart sub-ETF. If the original ETF is already smart the subset is a sort of smart ETF of the second order. The working paper shows that the question of different weighting-schemes is over-weighted. It answers also the frequently asked question about the impact of different re-balance periods. The risk-adjusted performance can be improved by either low-volatility or small-beta subsets. Momentum and Mean- Reversal works for some but not all ETFs.
    Revision 1 adds the results for idiosyncratic volatility.
  5. Is Daily Pairs Trading of ETF-Stocks profitable?
    Pairs trading is a venerable trading strategy. There is agreement that it worked fine in the far past. But it is less clear if it still profitable today. In this working paper the universe of eligible pairs is defined by the holdings of a given ETF. It is shown that the stocks must be from ETFs which select high-quality, low-volatility stocks. The usual closeness measure presented in the literature performs poor. The paper presents a simple and clearly superior alternative based on zero-crossings. The strategy performs with the correct universe and the improved pairs selection rule before trading costs quite fine. It depends on the assumed trading costs if this is also in real-trading life the case.
  6. Pricing Options with the Stochastic Volatility Regime Simulation for GARCH, HAR GARCH-VIX and VIX models.
    This working paper uses as a starting point the filtered historical simulation (FHS) approach developed by Barone-Adesi et al. One builds a GJR-GARCH model and generates Monte-Carlo return/price paths with normalized returns. This introduces a severe drift-bias. The Stochastic Volatility Regime Simulation (SVRS) avoids the bias by sampling from the same volatility regime. As an alternative to GJR-GARCH an asymmetric HAR and a GARCH-VIX model is used. Path sampling is done in the same way. As a model free alternative a VIX based approach is additionally investigated. This alternative clearly beats the models during the pre- and post-Brexit market turmoil. Barone-Adesi et al. transform the real-world into the risk-neutral measure. The current model stays in the real-measure. One simulates a realistic trading behavior by hedging the options along the Monte-Carlo paths. One can calibrate the model by adding external noise.
  7. Forecasting the VIX to improve VIX-Derivatives Trading.
    Konstantinidi et. al. state in their broad survey of Volatility-Index forecasting: "The question whether the dynamics of implied volatility indices can be predicted has received little attention". The overall result of this and the quoted papers is: The VIX is too a very limited extend (R2 is typically 0.01) predictable, but the effect is economically not significant. This paper confirms this finding if (and only if) the forecast horizon is limited to one day. But there is no practical need to do so. One can - and usually does - hold a VIX Future or Option several trading days. It is shown that a simple model has a highly significant predictive power over a longer time horizon. The forecasts improve realistic trading strategies.
  8. The dynamic hedging of weekly S&P-Futures Options: Cashbot case studies. Rev. 2
    Cashbot is a fully autonomous trading bot. I have added recently S&P-500 weekly Options trading. This is a hot topic with a lot of risk and fun. The strategy is currently tested with paper-trading. This note analyzes a dynamically hedged short strangle. This note does not give definite answers how to handle such a position in a complicated market situation. But it addresses several important practical questions.
    Revision 1 introduces a new Hedging method. The study extends the results to the next time period. There is hence no hindsight bias.
    Revision 2 extends the results to the next time period from 2016-02-09 to 2016-02-19.
  9. SPES: A Service-Points-Elo System for beating the tennis betting market.
    The Service-Points-Elo-System SPES uses the standard Markov-Chain-Model to generate the distributions of game, set and match results. Based on these distributions a straightforward Elo-System is developed. The Elo-Rating is not an arbitrary scaled number, but the service-point-probability of a player. The SPES forms the basis of a betting strategy. The strategy exploits the fact that it is not the business of bookmakers to win the prediction competition. Their goal is the largest profit with the lowest risk. They adjust the odds to balance the book. One only bets odds with favorable overround. The strategy is - in the extensive historic simulation - clearly profitable.
    This work and the presented results are a private hobby. There is no connection to the professional work.
  10. Chrilly's Toolbox of Energy Futures Trading.
    In a previous working paper (see below) I analysed the performance of several rolling strategies for the 5 most important Energy Futures in the last 10 years. It was assumed that one is always long the Futures. The task was to minimize the harm of rolling. Due to the weak performance of this sector there was in absolute terms (almost) nothing to gain. This working paper analyses several strategies which try to exploit all aspects - rolling, the term structure, mean reversion, seasonal-patterns and trends - of the Energy Futures market. Anything goes as long as it is profitable. Some of the strategies perform considerable better then the long-only portfolios. But the times they are A Changin' in the Energy- Futures market. It is difficult to find a consistent strategy which handles the different market-regimes successfully. Some of the winners proposed in the literature performed fine once upon a time.
  11. An empirical investigation of optimal Energy Futures rolling.
    When the first Commodity Futures Indexes were constructed not much thought was spent on the rollover strategies. The Futures were in backwardation and one cashed in the roll-yield by simply rolling over from the most nearby Future to the next one. The only consideration was liquidity. Market conditions have changed in recent years. Contango is now the more frequent case. The roll strategy is more sophisticated in the second index generation.
    This investigation analyses the performance of several rolling strategies for the 5 most important Energy Futures in the last 10 years. It is shown that one should avoid the crowd if one has to roll nearby Futures. The second generation indexes have - besides for RB - a clear edge. The performance of the different indexes is similar, with the S&P Dynamic Roll Strategy having a slight edge. Optimal rolling is most important for the CL- and NG-Futures.
    This is a major rework of the previous working paper which considered only WTI and Brent Futures.
  12. An empirical investigation of optimal crude oil Futures rolling.
    When the first Commodity Futures Indices were constructed not much thought was spent on the rollover strategies. The Futures were in backwardation and one cashed in the roll-yield by simply rolling over from the most nearby Future to the next one. The only consideration was liquidity. Market conditions have changed in recent years. Contango is now the more frequent case. The roll strategy is more sophisticated in the second index generation.
    This investigation analyzes the performance of several rolling strategies for WTI and Brent Futures in the last 10 years. It is shown that one should avoid the crowd if one has to roll nearby Futures. The second generation indices have a clear edge. The performance of the different indices is similar, with the S&P Dynamic Roll Strategy having a slight edge. Optimal rolling is more important for the WTI Futures than for Brent oil.
  13. The Poverty of Academic Finance Research: Spread trading strategies in the crude oil futures market.
    Harvey, Liu and Zhu argue that probably most of the Cross-Section of Returns literature is garbage. One can always try an additional factor and will find a significant Cross-Sectional result with enough trial and error. Lopez de Prado argues in a series of articles in a similar vein. Theoretically scientific results are falsifiable. Practically previous results and publications are checked only in rare occasions. Growth in a Time of Depth by Reinhart and Rogoff was the most influential economic paper in recent years. It was published in a top journal. Although the paper contained even trivial Excel-Bugs it took 3 years till the wrong results and the poor methodology was fully revealed The reviewers did not check the simple spreadsheets.
    This paper analyses a less prominent example about spread trading in the crude oil futures market by Thorben Lubnau. The author reports for his very simple strategy a long term Sharpe-Ratios above 3.
    It is shown that - like for Reinhart and Rogoff - one needs no sophisticated test statistics to falsify the results. The explanation is much simpler: The author has no clue of trading. He used the wrong data.
  14. Modeling and Trading the VIX and VSTOXX with Futures, Options and the VXX. Version 1.0
    Understanding the behaviour of the VIX and developing trading strategies for VIX related products is the leitmotif of the Sibyl-Working papers. In the previous papers a signal based approach was used. These strategies are the cash cows of the Sibyl-Fund. This working paper develops first a mean-reverting logarithmic model for the VIX. In the next step the relation between the VIX and VIX Futures is modelled. VIX Options are evaluated by Monte-Carlo Simulation of Option-Trading Strategies. The model is also applied to the VIX based ETN VXX and VXX Options and extended to the VSTOXX and VSTOXX Futures.
    The performance of several model-based trading strategies is backtested. The paper presents not only good but also bad or dubious trading ideas. The signal based strategies exploit the term-structure of VIX Futures. The model exploits additionally the mean-reversion of volatility. This improves - at least in the backtest - the performance. The paper discusses in appendix B the critique on the backtest methodology formulated in the paper "Pseudo-Mathematics and Financial Charlatanism". The (well known) critique has to be taken serious, but the suggested solution is of no practical use.
    Version 1 adds a completely different VXX trading strategy which was suggested by a reviewer.
  15. Trading the patience of Mrs. Yellen. A short VIX-Futures strategy for FOMC announcement days.
    There is consensus in the literature that the 8 scheduled FOMC meetings are the most important regular trading news. In "When No News is Good News - The decrease in Investor Fear after FOMC announcements" the authors show that the VIX and VIX-Futures decrease significantly after the announcements of the meeting. This paper confirms these findings. It omits the usual academic fuss and concentrates instead on the mundane questions of a detailed trading strategy.
  16. Lovers by night, strangers by day? An investigation of simple Overnight Trading Strategies.
    This working paper investigates the claim of several publications that most of the gains of stocks and stock-indexes are realized overnight. Additionally it is stated there is less volatility overnight than intraday. One gets with less risk more fun. But the data are in both studies outdated. This working-paper investigates if the effect still exists and if one can exploit it with a realistic trading strategy. The effect is still there, but less pronounced than stated in the older literature. The study reveals an interesting stylized fact. Overnight returns are positive correlated with market turmoil. Without trading costs one could implement a very simple and attractive trading strategy. Under realistic assumptions trading the S&P-500 E-mini futures is clearly worse than buy and hold of the ETF SPY. The Nasdaq-100 E-mini are a more promising choice.
  17. An investigation of simple Intraday Trading Strategies
    This working paper investigates the performance of several published simple intraday trading strategies for the S&P-500 futures. The general result is: The strategies do not work as advertised under realistic trading assumptions. The paper discusses some possible refinements. It is important to restrict the rules to specific market regimes. An appropriate regime-classifier is the Implied-Volatility-Term-Structure (IVTS) developed in previous working papers. The best strategy under investigation is a set of rules proposed by the Sibyl-Fund trader Siddharth Bhatia. But overall it seems to be difficult to develop a simple and attractive intraday strategy.
  18. Hedging Adaptive Put Writing with VIX Futures: The Affenpinscher Strategy
    In a previous working paper I analyzed the Austrian and Doberman Pinscher strategy (see below). The Austrian is an adaptive Put Writing strategy. One hedges the short position with a long Put with a lower strike. The Doberman is more aggressive. The long hedge is omitted. The risk is in both cases reduced by entry and exit conditions. The Affenpinscher uses the same general framework. But the hedging is done with long VIX Futures. There are several VIX Futures available. One selects the VIX Future with the lowest roll-value. The overall performance of the Affenpinscher is between the Austrian and Doberman Pinscher. The Pinscher strategies have generally an attractive performance. The best choice within the family is a matter of risk appetite.
  19. Adaptive Put Writing for the S&P-500 Index and Nasdaq Stocks: The Austrian- and Doberman Pinscher Strategy
    It is well known that the implied volatility of S&P-500 index options usually overestimate the realized volatility of the S&P-500. The most elementary way to exploit this fact is the CBOE S&P 500 PutWrite Index PUT. In a series of papers the group of Prof. Larcher at the University of Linz/Austria examined the possibility of improving the risk-adjusted performance of this basic approach. This working paper uses the techniques of the geographically nearby Larcher group as a starting point. It is shown that one can improve the result by taking additionally the Implied-Volatility-Term-Structure into account. It addresses and answers also some "open questions, future research" topics of the Larcher papers. It is also investigated if the strategy can be applied to Nasdaq Stocks. The performance of the strategy is quite attractive. But one has to be alert like an Austrian Pinscher to avoid the considerable risk of Put Writing.
  20. Adaptive Covered Call Writing for Nasdaq Stocks: The Turtle Strategy
    Covered Call Writing is a venerable strategy. It is usually added to an existing portfolio of stocks. One trades-off upwards potential in strong rallies against a constant stream of additional income from options writing. This work investigates various aspects of this strategy for Apple, Ebay and Google over the last 8 years. It is shown that an adaptive approach works best. The turtle is no silver bullet, but one gets at least the same performance in a considerable smoother way. The reduced volatility is - over the considered time range - a free lunch.
    In a second step long Puts are added for additional downside protection. The strategy becomes a (loose) Collar. The Collar improves the Sharpe-Ratio, but the overall profit is considerable lower.
  21. Simple and Efficient Portfolio Construction with implicit Covariance Estimation: The Ant Strategy. Revision 1
    It is well known that Modern Portfolio Theory does only work in theory. It requires a reliable estimation of expected returns and the expected covariance matrix. The universe of assets must form a multivariate normal distribution. One needs a long time series of historic data to estimate the covariances. But the covariances are not stationary. They change over time.
    The Ant Strategy avoids the explicit covariance estimation at all. One starts with an initial population of random portfolios and improves them with Differential Evolution. The optimization criterion is the risk adjusted return of the portfolio itself. The covariance matrix is only implicitly taken into account by the performance of the portfolio. The behavior of this method is demonstrated for a Diversified universe of ETFs and for the Nasdaq- 100. The results are compared to a Momentum approach called the Donkey developed in previous working papers. The Ants have an edge over the Donkey.
    Revision 1 adds the Implied-Volatility-Term-Structure (IVTS) as a Stop-Loss Signal. This improves the performance and reduces downside risk.
  22. Smarter than the Options-Market? A Real-Measure GARCH Option Pricing Model with Volatility Regime Simulation.
    This working paper uses as a starting point the filtered historical simulation (FHS) approach developed by Barone-Adesi et al. One builds a GRJ-GARCH model and generates Monte-Carlo return/price paths with normalized returns. This introduces a severe drift-bias. The Volatility Regime Simulation (VRS) avoids the bias by sampling from the same volatility regime. Barone-Adesi et al. transform the real-world into the risk-neutral measure. They calibrate the GARCH model to the market prices of plain-vanilla options.
    The current model stays in the real-measure. One simulates a realistic trading behavior by hedging the options along the Monte-Carlo paths. The model generates the stylized facts of SPX options. The overall agreement with market-prices is quite good. According the model Calls are somewhat under-, Puts are somewhat overpriced.
    The second part of the paper demonstrates the promising application of the model for index options trading.
  23. Plain Vanilla SPX-Options Hedging: The Effect of Smile-Adjustments and the Lark versus Owl Question. Revision 1
    Compared with the veritable explosion of research on pricing OTC options with path-dependent and/or exotic pay-offs there has been relatively little research on hedging vanilla options. Yet exchange trading on standard vanilla options is much more active than trading on OTC products. This working-paper tests for SPX options the effect of vega adjusted delta-hedging on several trading strategies developed in a previous working paper. During volatile markets risk reduction from regime-dependent delta hedging is much greater than during tranquil periods. It is shown that a very simple regime classification scheme (slightly) improves the hedging-performance.
    In the literature hedging is usually performed daily. The simple question "at what time of the day" is up to my knowledge never addressed. The second part of this paper deals with the Lark versus Owl question. Is it better to do the daily hedge after the open or before the close?
    The available high-frequency time-series are too short and sparse to answer this question definitely. According the limited data the Owl has on a few turbulent days an edge, otherwise the performance is very similar.
  24. Downside Beta Portfolios: The Cinderella Strategy
    Ang, Chen and Xing have shown in Downside Risk that stocks that covary strongly with the market during market declines have high average returns. The reward for bearing downside risk is not simply compensation for regular market beta, nor is it explained by coskewness or liquidity risk, or by size, value, and momentum characteristics.
    The downside beta premium is not for free. The drawdown is considerable amplified in times of market troubles.
    This working paper combines the results of Ang, Chen and Xing with a signal based approach developed in previous working-papers. The implied-volatility-term-structure (IVTS) classifies market regimes. One invests only in the favourable regime fully into stocks with high downside beta. Due to this classification the downside beta premium is (almost) a free lunch.
  25. VIX Futures Basis Trading: The Calvados-Strategy 2.0
    In previous working papers I developed the Sidre and Most-Strategy. The strategy relies on the typical term- structure of VIX futures. The Calvados is a refined and condensed version of these strategies.
    The basic idea is from a paper from Simon and Campasano . The authors demonstrate that the VIX futures basis does not have significant forecast power for the change in the VIX spot index, but does have forecast power for subsequent VIX futures returns. It is especially profitable to short VIX futures contracts when the basis is in contango. The original Calvados working paper presented improved metrics and parameter settings of the Simon&Campasano approach. The current working paper improves the original work in several points and extends the historic backtest. The overall patterns of the original results are reassured and improved upon. The Calvados is traded in the Sybil-Fund. It is so far the pick of the bunch. One gets a lot of fun for a medium dose of risk.
  26. Improving the S&P Dynamic VIX Futures Index: The Mojito 3.0 Strategy
    This working-paper applies ideas from the HeroRATs strategy to the Mojito 2.0. The HeroRATs introduced the new VIX-short-term-index VXST and removed IVTS spikes with a median filter. The VXST contains for the Mojito no valuable information. But the median-5 filter is a clear improvement. This working paper improves also the regime-thresholds of the strategy.
  27. How to beat the market with the Implied Volatility Term Structure: The HeroRATs Strategy
    In a recent paper published on SSRN the authors propose a simple paired-switching strategy. One selects a market-long ETF (SPY) and a negative correlated ETF (TLT). Depending on the 13-weeks momentum one holds either the SPY or the TLT. This working-paper is a considerable refinement of this simple idea. Instead of the momentum the implied-volatility-term-structure (IVTS) is used as a selection criterion. There are no fixed periods, but the decision is taken on a daily basis. The IVTS was used successfully in a series of previous working-papers. This working paper extends the IVTS by the recently introduced VIX-Short-Term Index VXST. The performance can further be significantly improved by filtering the IVTS with a median filter. The resulting strategy is very easy to implement and has minimal trading-costs. It beats the market (SPY) by a wide margin.
  28. Crack Spread Trading: The Pekin Duck Strategy
    The Pekin Duck is the latest species in a series of pairs- and spread-trading working papers. The Pekin trades with crack spreads. The crack can be combined with a calendar spread. The standard crack is -3:2:1. Shorting 3 crude oil futures (CL) and going 2 gasoline (RB) and 1 heating oil (HO) futures long. This spread coincides with the production process. But according a preliminary visual and statistical study this combination is - at its best - very weakly CoIntegrated. This is also true for -1:1:0 (CL v. RB) and -1:0:1 (CL v. HO). There is only one interesting crack left: 0:-1:1 or gasoline (RB) versus heating oil (HO). This is also in agreement with trading experience. Trading this spread is termed the Pekin Duck strategy. The Pekin is so far the most attractive within the Duck breeds. Trading only the crack spread is a relative save bet. But there are periods were no interesting pair is available. Combining the crack- with a calendar spread creates more fun and risk.
  29. Natural Gas Pairs Trading without CoIntegration: The Wild and Black Duck Strategy
    This working paper is a complete rework of Pairs Trading with CoIntegration: The Duck Strategy.
    The original CoIntegration test is in it's explicit form skipped, because it adds no additional value. All interesting Natural Gas futures pairs are CoIntegrated. Instead a measure for the most interesting pair is developed. This rework is termed the Wild Duck strategy. Additionally a different model which operates on the forward-curve and the specifics of the Natural-Gas market is proposed. This new model - the Dark Duck - works slightly better than the traditional pairs approach. But the two species are closely related. The historic performance patterns are similar. They depend on the overall volatility of the natural-gas market.
  30. Change Point Trading: The Snowy Strategy
    Change-Point Detection is a venerable discipline with it's roots in process control. The classical CUSUM algorithm is the working horse of this field. Detecting Change-Points is also a major problem in finance. The starting point of this work was the Mojito Trading strategy (see Dynamic VIX-Futures-Strategy Version 2.0). The Mojito uses the Implied-Volatility-Term-Structure (IVTS) as a signal for trading the VXX. The initial idea was to apply the CUSUM algorithm to the IVTS. This works reasonable, but it can't be really called a full fledged CUSUM application. As a next step Absolute Snowy was developed. Absolute Snowy uses the absolute Returns of the VXX as the signal. This method is not only restricted to the VIX, but can be applied as well to the SPY and other time series. Snowy does a good job to detect change-points. He also does not overly bark on false alarms. Absolute Snowy is probably the first fully working CUSUM application in finance.
  31. Small-Large-Cap Trading: The Snail Strategy
    Small-Caps outperform in normal times Large-Caps. But during crashes there is a flight to quality. Large-Caps loose less. The Snail Strategy goes therefore in normal times a Small-Cap ETF long and a Large-Cap ETF short. The roles are reversed in times of troubles. One goes the Large-Cap long and the Small-Cap short. The critical point of such a strategy is the correct classification of market-regimes. For this purpose the Implied-Volatility-Term-Structure (IVTS) is used. The IVTS is the leitmotif in the Sybil project. The strategy performs especially well in crash phases. But it suffers in the last 2 years from the small margin between Small- and Large-Caps. The Snail Strategy delivers no spectacular immediate results. It is a strategy for the patient investor. To speed it up one can trade the ultra snail.
  32. Chrilly's Complete Guide to Momentum Trading: The Donkey and Mule Strategy working-paper is a complete rework of the previous papers about the Donkey and Mule Strategies.
    It is an up to date and comprehensive coverage of the state of the art in momentum trading. The Donkey is a momentum strategy for a large set of ETFs and Nasdaq stocks. The Mule applies a similar concept to a collection of commodity-, bonds-, FX- and index-futures.
  33. The Boosting the SPY with the VXX: The Daiquiri Strategy working paper describes a combination of a S&P-500 long position (ETF-SPY) with short-term VIX-futures (ETF-VXX). The starting point is the VEQTOR index developed by S&P. The effect is similar to hedging the S&P-500 with puts. The Daiquiry performs considerable better than the VEQTOR.
  34. The A broad hint from the VIX: Trading the market with implied volatility working paper demonstrates that one can extract with relative simple methods relevant information from the implied-volatility surface. Although these results form also interesting trading strategies, the primary focus of this study was to test different VIX related measures in a simple two-asset allocation problem. These results should also be useful in more complex allocation problems.
  35. The SPX-Options Trading: The Kir Strategy working paper considers first the usefulness of GARCH-models for options trading. Although the features of the developed GARCH-model are statistically attractive, the answer is: GARCH-models are an academic exercise. The idea was dropped and replaced by the simple Implied Volatility Term Structure (IVTS). Adding the IVTS information improves the trading strategies significantly.
  36. The Riding the dead FX-Carry Horse working paper examines the question if FX-Carry-Trading is still profitable. FX-Carry-Trading was until 2007 a foolproof cash-cow. Carry-traders capsized in the 2008 crash. As a reaction to this crash central banks clamped the interest rate to (almost) zero. There is an ongoing debate, if this policy is the final dead of this strategy. This working paper shows, that there is still considerable profit potential. But it is definitely not a foolproof task anymore. The carry-horse is not dead, but one has to buy a stronger whip and to change riders.
  37. The Riding on the LIBOR- and Euribor-Forward-Rate-Curve working paper examines the behavior of the Eurodollar- and Euribor- Futures forward rate. After some theoretical investigations a simple and profitable trading strategy is examined. The strategy relies on the typical monotonic increasing Eurodollar and Euribor term-structure.
  38. The Leveraged ETF-Trading: The Johnny Walker-Strategy working paper examines a strategy which is based on short-selling of Leveraged-ETF's. Leveraged-ETF's have been called money-traps. This strategy traps the money of uninformed investors. The strategy exploits the volatility-drag of LETF's.
  39. The DaLEI is a Daily Leading Economic Index similar in spirit to the widely used LEI or the OECD Composite Leading Indicators. The DaLEI uses daily-, weekly- and monthly data and can be - in contrast to the LEI - calculated on a daily basis.
  40. The Market-Regimes with a Hidden-Markov-Model working paper tries to identify the current overall market situation. The regimes are directly calculated from market-data with a relative sophisticated mathematical approach.
  41. The Scenario-Generation with IVTS Block-Sampling working paper presents a novel method for generating scenarios for portfolio optimization and risk models. The method is simple, fast and flexible. The resulting data are closer to the stylized facts of financial time-series than comparable methods. There is (yet) no accompanying chart. The method is currently used for Portfolio-Construction (see the working paper below).
  42. The ETF-Portfolio-Construction working paper describes a committee approach for portfolio calculation. The committee improves the diversification of the selected assets. Omega - a generalization of the Markowitz-approach - is the optimization criterion. The working-paper delineates also the experience with the new Go-Programming language.
  43. The ETF-Portfolio-Analysis working paper is a detailed analysis of a specific portfolio. One gains an insight for the effects of the optimization method.
  44. The Selling Volatility Insurance working paper describes the Sidre- and Most-Strategy. The strategies rely on the typical term-structure of VIX futures. The Sidre is a calendar spread. The Most sells naked VIX-Futures. The strategies have similar characteristics than selling Puts. To control the risk a simple, but efficient signal for entering and stopping the position is used.
  45. The Trading Low-Volatility ETF's working paper describes the Irish-Cream Strategy. The Irish-Cream combines the Low-Volatility ETF SPLV with the base-ETF SPY and the inverse SH to improve the overall performance. The Irish-Cream can be applied to other ETF combinations too.
  46. The Dow-Jones Low-Volatility Index is an extension of the S&P-500 Low-Volatility index to the Dow Jones. The index is easy to trade. One can construct in the same way also a High-Volatility Index. The Baileys Strategy invests usually in the Low-Vol Index. In calm markets phases the investment is shifted to the High-Vol Index to boost the overall performance. The method can be easily extended to other markets like the DAX.