Simple model for effect of bond convexity on Stock Index Futures

Quote from nazzdack:

Post your question at wilmott.com. The quants over there might have an answer.
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Thanks for the suggestion. I posted a link to the Wilmott forum in this thread after a tip from dhpar on what to google. Looks like they did have the answer in the form of that 7-part paper.

nitro
 
Quote from dhpar:

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re CDS: almost impossible to get intraday tick data. Creditex has platform (I think without API) which is kind of live screen with quotes - but it will cost you dear. The best source for daily data is certainly Markit - but they will likely screw you up too.:(
You may be lucky though. Coincidentally today CBOT starts to trade a new product (ticker CX). It is a future on index of 50 US investment grade credits. (see this thread: http://www.elitetrader.com/vb/showthread.php?s=&threadid=97404&highlight=cx) But here you will have to wait for some data history and mainly if the product succeeds.

gl (and keep it simple ;)
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That's a really interesting development. Thanks for the great tips!

nitro
 
CX: thinly traded, no [credit derivatives] dealer side support; lacks any supporting correlation market. almost entirely useless. cds/cdx/etc are still entirely otc with no participant interest in becoming more transparant.
 
Quote from sjfan:

CX: thinly traded, no [credit derivatives] dealer side support; lacks any supporting correlation market. almost entirely useless. cds/cdx/etc are still entirely otc with no participant interest in becoming more transparent.
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it would be my first bet too - it already happened in Europe with iTraxx if I remember well.
I thought that CX really kicks of today - funny to see it is actually dead before it does so. Still I will check a bit more as I would love to trade it...:mad:
 
... there is a part of me who really wants to see retail people trying to trade credit derivatives.... it's got to be hilarious to watch discussions on what's the best moving average to use or how it bounces on certain resistance levels (I don't mean to be smug - but credit spreads are inherently very different from, say, forex or equity).

... but then again, I liked this market being closed.
 
Quote from sjfan:

[B... there is a part of me who really wants to see retail people trying to trade credit derivatives.... it's got to be hilarious to watch discussions on what's the best moving average to use or how it bounces on certain resistance levels (I don't mean to be smug - but credit spreads are inherently very different from, say, forex or equity).

... but then again, I liked this market being closed.
[/B]
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it is like with any market that you introduce to public - there is simply a lot of chips to distribute among people who have the experience - hence its attractiveness.

It also means that some fat needs to be shaven from dealers and there is a lot of fat in credit right now (especially in Flow). The market grew so rapidly that almost anybody junior got hired - you simply took the guy even if he performed average at an interview because you had to. The best guys has left to start their own businesses (in credit or else).
So there are a lot of monkeys left that are shaking when they hear something like transparency. By the way the first firing wave already happened in 2004/2005 when MiP basically became a benchmark. Similar thing still needs to happen in Structured.
 
This got me thinking: MBS never went retail; interest rate swaps never went retail; perhaps things like cds and synthetic tranches will never go retail either.

There's fat to trim on the dealer side, but perhaps not as much. Standardized indices are now often 500M+ on each side with 1/4 bps spread. Single names are still wide, but not near as wide as they were. Given that retail can't really trade on the same term as real money accounts (hell, hedge funds can't even get the same financing terms), there can't possibly be that much extra volume coming from the retail side.
 
It would be hilarious to see "retail" trading CDS's..

It would even be more hilarious to see the MBS/ABS Convexity quotes from bloomberg being shown on CNBC as if it were a stock ticker.

I have officially turned bearish on stupid people in society.. LOL

ok, all kidding aside...

Nitro [no this rant wasn't directed at you]... What makes you say that you expect an inverted y/c coming soon?

We have rallied extensively off of the lows in inversion territory, and based on the chatter I still hear on the FI desks here in NY (for however long I am here).. the cash is starting to flow back into steepener trades in the YC..

I don't have the exact numbers in front of me at the moment (it is 2am and i'm tired)
 
guys - take a break. the only one who is talking in this thread about retail (whatever it means) is you (sjfan; chibondking).
maybe you can add something to this thread topic - can you?

regarding interest rate swap; well what about treasury future as an analogy? this future is much more complicated than any CDS, recovery lock or whatever. I bet that at least 50% credit traders can't calculate CTD themselves without looking into BBG or their quants sheets - so much for the intelligence on the desk...
By the way Swap futures trade on CBOT despite having wider b/o.
 
Quote from dhpar:

re Salomon papers: I see that in the thread you posted are all 6 parts but in addition at the bottom there is a part 7 which I thought never got published. Looking forward to read this one cheers ;)
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Where is the link for the part 7 of the yield curve serie papers?
 
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