We model continuous-time information flows generated by a number of information sources that switch on and off at random times. By modulating a multi-dimensional Lévy random bridge over a random point field, our framework relates the discovery of relevant new information sources to jumps in...

Recent studies show that volatility-managed equity portfolios realize higher Sharpe ratios than portfolios with a constant notional exposure. We show that this result only holds for “risk assets”, such as equity and credit, and link this to the so-called leverage effect for those assets. In...

In the late stages of long bull markets, a popular question arises: What steps can an investor take to mitigate the impact of the inevitable large equity correction? However, hedging equity portfolios is notoriously difficult and expensive. We analyze the performance of different tools that...

Hedging equity portfolios against the risk of large drawdowns is notoriously difficult and expensive. Holding, and continuously rolling, at-the-money put options on the S&P 500 is a very costly, if reliable, strategy to protect against market sell-offs. Holding ‘safe-haven' US Treasury bonds,...

We study the econometric properties of dynamic risk parity, which volatility scales to equalise risk through time using the precision process, the inverse of the time-varying volatility. A particular focus is on the impact of the Sharpe ratio. We give necessary and suffcient conditions that...