Vol Laundering and the Portrait of a Perfect Hedge
Alpha Exchange
by Dean Curnutt
3d ago
If smoothing returns is the feature not bug of private equity and credit, what strategy fully embraces the virtue of honest mark to market risk?  What strategy highlights price shocks and the resulting level at which a portfolio could be unwound in a hurry as the basis of thinking about its efficacy?  In this short podcast, I make the case that exposure to vol – to the anti-fragile - is going to be a part of this strategy. That is, long exposure to options-based insurance. I hope you enjoy and find this useful. As always, I appreciate your feedback ..read more
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MIchelle Meyer, Chief Economist, Head of the Mastercard Economics Institute
Alpha Exchange
by Dean Curnutt
3d ago
A Wall Street economist who served institutional clients at both Lehman Brothers and Bank of America, Michelle Meyer, transitioned to Mastercard two and a half years ago, now serving as the firm’s Chief Economist and Head of the Mastercard Economics Institute. I had the opportunity to catch up with Michelle back in May and while much has of course happened in the world since, there are some valuable insights shared in our discussion. We first survey the similarities and differences in her new role at Mastercard versus the traditional sell-side economics role in which she served. Here, she says ..read more
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Cuban’s Collar is Jensen’s Alpha
Alpha Exchange
by Dean Curnutt
2w ago
It’s been 25 years since Mark Cuban implemented an exceedingly well-timed and attractively priced hedge on shares of Yahoo.  In this short podcast, we review the popular “zero cost collar” trade and discuss the factors that impact its pricing. Cuban is known for playing offense in investing, buying the Mavs and making deals on the Tank. But his defensive trade on Yahoo years ago has been critical in his wealth accumulation. We bring in Jensen Huang, the owner of a few shares of NVDA, and make the case that he ought to consider this risk reducing collar transaction. I hope you find the dis ..read more
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Correlation, Crowding and Convexity
Alpha Exchange
by Dean Curnutt
3w ago
There’s been some decent ink spilled recently on the “dispersion trade” which has profited from the epically low level of realized correlation among stocks. If winning trades attract capital and erode the margin of safety in the process, is this exposure crowded and vulnerable to an unwind?  In this short pod, I lay out a 5-part, informal framework for thinking about risk-off episodes. In the process, we consider the pricing of vol and correlation. While the spill-over risk from dispersion trades gone wrong doesn’t appear to be high, the pricing of index volatility that results from never ..read more
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Garrett DeSimone, Head of Quantitative Research at OptionMetrics
Alpha Exchange
by Dean Curnutt
3w ago
Earning a Ph.D. in financial economics is no small feat. And not only did Garrett DeSimone do just that, but he would unknowingly embark on his future career in the process of doing so. His dissertation from the University of Delaware involved the study of event risk premia in single stocks ahead of earnings. And to perform the analysis he engaged with OptionMetrics, a firm specializing in implied volatility data. Now the Head of Quantitative Research there, Garrett leads the firm’s efforts to deliver carefully constructed data sets to its client base, while generating original empirical studi ..read more
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There’s No Crying in Correlation
Alpha Exchange
by Dean Curnutt
1M ago
The study of correlation is valuable, informative and, likely an over-indulged in activity on Wall Street. That said, there are important risk considerations when it comes to how significantly assets move together or do not. The task at hand in this short podcast is to illustrate and contemplate the diverging paths of two important correlations: that between the stock market and bond market and second, between equities themselves. If the stock market is diversifying itself in real-time, there are reasons to think it cannot last indefinitely.  I hope you enjoy ..read more
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The Zeroes…A Cross Asset Sequel
Alpha Exchange
by Dean Curnutt
1M ago
With option prices in the doldrums, your host provides some thoughts on why and in the process reflects on the skinny levels of risk premia a decade ago. I finish with some cautionary observations around what might go wrong. I hope you enjoy this short pod ..read more
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Raghuram Rajan, Professor of Finance, Chicago Booth, and Former Head of Reserve Bank of India
Alpha Exchange
by Dean Curnutt
1M ago
It was a pleasure to welcome Raghuram Rajan back to the Alpha Exchange. Raghu is currently a distinguished professor at the Chicago Booth School of Business and is the former head of the Reserve Bank of India. With a deep understanding of the intersection of markets, the economy and policymaking, he is among the most important voices on Central Banking. With this in mind, our discussion explores his recent book “Monetary Policy and Its Unintended Consequences”, the title alone of which is entirely through provoking. Raghu shares his assessment of the tendency for policy towards increasing asym ..read more
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Harry Markopolos, "The Man Who Knew"
Alpha Exchange
by Dean Curnutt
1M ago
Corporate Fraud is an unfortunate, costly and seemingly never-ending aspect of the world of business. In the best case, fraud is prevented or, at least caught before harm is done. All too often, however, these cases of deception lead to large financial losses, impacting the lives of many - shareholders, individuals and certainly those that are courageous whistleblowers. A little more than 15 years after the unwind of the Madoff Ponzi scheme, I invited Harry Markopolos back to the Alpha Exchange. Harry is often simply referred to as “the Man Who Knew”. He chased Madoff for years, serving up a ..read more
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Jerry Peters, Managing Partner, Smithbrook, LLC
Alpha Exchange
by Dean Curnutt
3M ago
The “rule of 72” tells us that a good approximation for the time it takes to double your money can be arrived at by taking 72 and dividing by the interest rate that capital can compound by on an annual basis. Implicit in the calculation is that the initial stack is left untouched and is not vulnerable to a drawdown. In this context, it was great to welcome Jerry Peters, the Managing Partner of Smithbrook to the Alpha Exchange. Providing a risk-managed equity solution to its high net worth clients, Jerry and team are focused on managing downside risk, utilizing an option overlay strategy to mit ..read more
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