Search results

Doesn't matter, the dynamics are the same, regardless of the asset class.

I agree with you that some of the FX aspect will be captured when you use JGB futures. However, the whole point of the carry trade is to borrow cash in yen to lend in a higher-yielding ccy. You need to actually do that and take on the risk (through actual cash) in order to be rewarded with...

Not necessarily... If we're lucky and stupid, we won't have it now. If we're monumentally lucky, we delay it long enough to hopefully grow out of it.

Indeed, my friend, anything is possible, which is why you do need a diversified portfolio, part invested in guns :)... However, I actually think that, due to the unique features of the UK IL mkt (huge pension liabilities, as well as public sector wages, are linked to inflation), screwing...

A well-diversified portfolio of equities, IL gilts, property, arable land, gold, canned food and guns should do the trick (personally, I am not there yet, as I only own some IL24s and gold :))...

My answer is that it's obvious that the seller of the option has an edge provided he/she is allowed to not mark to market. It's obvious because that's precisely the business model of insurance companies and insurance companies are, generally, profitable. Fundamentally, people who mentally do...

At expiry, your pnl (as evidenced by the well-known option payoff diagram) will be, by definition, S - K - (price you paid for the option), assuming you bought a call. S is spot, K is strike. Does that make sense?

Now you're confusing me... What does delta (and any other option concept) matter when the option is dead? I thought you're trying to calculate your pnl at expiry? If you're doing it at expiry, it's just the pnl on the underlying that you got as a result of expiry minus the price you paid...

Not to the same extent in EURland... I know they're expensive from bitter painful experience. To see it you just need to look at the shape of the real yield curve. The UK one is VERY inverted (although less so than before), due to the structural bid for long-dated inflation.

Think of it this way. An ITM option expiry is equivalent to a transaction where you sell the option for a price of 0, while buying/selling the underlying at the strike price. So all you have to do is think of what the pnl is on the set of three transactions: buying the option at X; selling...

It's a dumb question... Once an option expires, there's no concept of intrinsic or time value. You have a spot position, period. The pnl on that position is whatever it is.

I disagree with you, PI... The IL gilt mkt is, in my view, a good way to hedge against inflation, provided that it's a part of your portfolio. The biggest advantage of having these bonds indexed to RPI is that RPI factors in the housing component in a very transparent and straightforward way...

I don't buy his argument... I think it has more to do with the fact that Dresdner is, basically, ceasing to exist. That's a lot more plausible than supposing that they can't or don't want to sell the paper.

Well, the green shoots are all about the creditor nations willing to give the US consumer (through the US govt) free funding on his/her new borrowing, in a desperate bid to prevent the said consumer from stuffing too much of his/her cash under the mattress. If the consumer goes all...

This is the link to the OCC pres release, FWIW: http://www.occ.treas.gov/ftp/release/2009-77.htm

Ouch! Green shoots seem to be turning into brown sh1ts, indeed...

You won't be able to do the carry trade that you're thinking about using JGB futures. There's two components to the sort of thing you're looking at. One is the carry on the bond, which you won't be able to realize, as you're not funding the bond yourself and the futures are already pricing...

Well, we shouldn't believe everything BIS says. In early 2007 they published a report where they stated (with various caveats, natch) that the world has entered an era of low volatility. That prediction turned out to be somewhat of a miss.

The bond basis book is a good read and very educational. However, it's only truly required reading if you intend to punt bond futures/cash bonds.

It's the wonderful world of interest rates, which means normal, aka basis point vol. Here again, Burghardt is your man and his Eurodollar bible is your book.