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Yasmine Hayek Kobeissi

 
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  • Risk Models Built On Sand [View article]
    formal risk estimation in finance continues to be useful as long as we didn't hit extremes. we can use it as long as everything is going well. like fund managers who slightly outperform their benchmarks in clearly defined trend markets (bullish or bearish) but end up loosing years of performance and underperform hugely when an extreme happens.
    May 24 12:07 AM | 2 Likes Like |Link to Comment
  • Risk Models Built On Sand [View article]
    One of the main features of financial markets is the alternation of periods of large price changes with periods of smaller changes. Fluctuations in volatility are unrelated to the predictability of future returns. This statement implies that there is autocorrelation structures dependence in the absolute values of returns. The multifractal model of asset returns combines the properties of Levy-stable processes (stationary and independent stable increments) and fractional Brownian Motions (tendency of price changes to be followed by changes in the same (or opposite) direction) to allow for long tails, correlated volatilities and either unpredictability or long memory in returns.
    The key here is to identify and measure indicators that allow us to construct a model that accounts for extreme consensus factors (un-disseminated information, correlated investment horizons and high leverage) in estimating market reversals. Instability is a relatively subjective notion. If we think in calendar time, the system is unstable as the daily fluctuations seem erratic when compared to periods of months and years. But if we think in intrinsic time, it is as if we are looking at the week as a year, the day as a month and the minutes as days… in doing so, and as markets are “self-affine” then the L-stable process can be found at the day level and the erratic fluctuations will be at the seconds level.
    Each market phase has its trading opportunities. An offensive approach is based on the notion of diversification at the strategy level between directional and volatility strategies; and of a macro-design approach.
    Tools such as cyclical and psychological analysis, fundamental convergent analysis and the estimation of risks, allow us to evaluate the market biases in order to establish an accurate estimation of the prevailing state of the system and the risk towards which it is heading. Once markets’ characteristics are grasped, risk forecasting models can be enhanced. Models can be built on the basis of multifractal markets but are not limited to using only fractal tools such as for example the Hurst exponent. In fact, fractal thinking allows us to discern the most appropriate way of developing models. Be it technical analysis, behavioral finance, cycles analysis, power laws, thermodynamic etc.…all of these are useful as long as we know how to implement them in our models whilst remaining aware of their limits.
    May 22 02:23 PM | 2 Likes Like |Link to Comment
  • Risk Models Built On Sand [View article]
    Mind the risk means to be aware that markets are more risky than we think. Risk cannot be limited to a simple measure to comfort investors (as done so far).
    A strategic investment decision must not only be based on the best information available, but also on the possibilities of error in the systems of calculation and the implementaion of strategies. All portfolio management is subject to risks and evaluation errors, either in the identification of the specifics of the economic and financial cycle in question, the level of the calculation of the value of an asset, or the degree of the sensitivity of the portfolio to risk factors. Once all of these measures are in place, we need to adopt offensive strategies that include macro tail risk management strategies to face unexpected market events. To be able to achieve and protect gains , it is imperative to only take on the risks that can be afforded and to account for the true magnitude of risk. Not all strategies can be hedged and we can never implement a perfect hedge.
    May 22 02:11 PM | 2 Likes Like |Link to Comment
  • Risk Models Built On Sand [View article]
    Markets may offer profitable arbitrage trading opportunities when:

    1. heterogeneous perceptions create some uncertainty and differences, albeit minimal, between the market price and the fundamental price
    2. Lags in information dissemination creates greater disparity between the equilibrium price and the actual price
    3. Arbitrageurs can generate enough profit to cover transaction and information costs
    4. Execution risk is low due to High volume of trading

    this is one of the phases of the market cycle that I call in my book: Constrained and optimal entropy model in Noisy information systems.
    May 24 12:25 AM | 1 Like Like |Link to Comment
  • Risk Models Built On Sand [View article]
    well this is the beauty of multifractals: it is just a way of thinking to understand markets characteristics. understand our limits and play defense or offense depending on each ones risks budget.
    the key is that we cannot forsee trends in the medium long term. all what can be done is forsee risks cycles and decide our strategies.
    May 23 03:29 AM | 1 Like Like |Link to Comment
  • Risk Models Built On Sand [View article]
    totally agree. risk management lies in diversification and low leverage exposure. not only assets diversification (as correlations tend to 1 when liquidity drains...) but also strategies diversification (convergent / divergent, volatility strategies (long short...)...
    May 22 01:55 PM | 1 Like Like |Link to Comment
  • Exchange Traded Funds: Another Black Box? [View article]
    Looks like the article is confusing to you, im clearly pointing to synthetic ETF.
    Aug 29 06:21 PM | Likes Like |Link to Comment
  • Risk Models Built On Sand [View article]
    One the main features of financial markets is the alternation of periods of large price changes with periods of smaller changes. Fluctuations in volatility are unrelated to the predictability of future returns. This statement implies that there is autocorrelation structures dependence in the absolute values of returns. The multifractal model of asset returns combines the properties of L-stable processes (stationary and independent stable increments) and fractional Brownian Motions (tendency of price changes to be followed by changes in the same (or opposite) direction) to allow for long tails, correlated volatilities, and either unpredictability or long memory in returns

    In summary, information is neither totally nor immediately integrated in market prices, but manifests itself as a bias. This bias continues until the arrival of new information that changes the bias’ magnitude, direction or both after a given number of observations in a series.
    May 26 09:38 AM | Likes Like |Link to Comment
  • Risk Models Built On Sand [View article]
    check that research http://bit.ly/K1r6C3
    May 26 09:36 AM | Likes Like |Link to Comment
  • Risk Models Built On Sand [View article]
    Financial systems are at the edge of chaos, meaning that their evolution is very sensitive to initial conditions: we can never go back and calculate the starting point. no cycles resembles another. markets keep shifting, restructuring themselves to ensure survival. with this in mind and through understanding the subtle characteristics of fractal geometry, we can understand financial systems, though that doesn't mean we can predict it. how does that is helpful at all? we become able to identify the risk characteristics of the market we want to trade and decide if we can enter or no this market.
    May 26 09:33 AM | Likes Like |Link to Comment
  • Tail Risk Hedging: Investing In Hedges [View instapost]
    Thank you, I'm glad we share the same way of thinking
    May 24 10:23 AM | Likes Like |Link to Comment
  • Risk Models Built On Sand [View article]
    exactly INTUiTION. Through experience, skilled professionals have learned how to react to events and figure out precisely what to do next. The process is unconscious; what happens is that through mental effort they acquire enough knowledge (research, analysis...) to attain intuition, an unconscious thinking skill. They can focus and concentrate on the task at hand until they resolve it and they can do that quickly, while others are overcome with panic.
    May 23 03:36 AM | Likes Like |Link to Comment
  • Vivus: Ready To Explode Higher On Qnexa Approval [View article]
    It has been pushed to July 17!!!
    Apr 13 02:59 PM | Likes Like |Link to Comment
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