A basket is a set of instruments that are held together because its statistical profile delivers a desired goal, such as hedging or trading, which cannot be achieved through the individual constituents or even subsets of them. Multiple procedures have been proposed to compute hedging and trading...

Every structure has natural frequencies. Minor shocks in these frequencies can bring down any structure, e.g. a bridge. An Investment Universe also has natural frequencies, characterized by its eigenvectors. A concentration of risks in the direction of any such eigenvector exposes a portfolio to...

We divide hedging methods between single-period and multi-period. After reviewing some well-known hedging algorithms, two new procedures are introduced, called Dickey-Fuller Optimal (DFO), Mini-Max Subset Correlation (MMSC). The former is a multi-period, cointegration-based hedging method that...

This paper considers the production planning problem of a firm that produces a single product using a process that has multiple production lines (or machines) in parallel, each with a finite production capacity. Specifically, the firm has m parallel production lines, each with capacity of P...

It is now an accepted fact that the majority of financial markets worldwide are neither normal nor constant, and South Africa is no exception. One idea that can be used to understand such markets and has been gaining popularity recently is that of regimes and regime-switching models. In this...

The proliferation of algorithmic high-frequency trading in financial markets has also led to an increase in new types of fraudulent activity. Since the flash-crash of 2010 first brought it to popular prominence, layering or spoofing fraud has become a major concern for financial regulators...

Risk factors and systematic factor strategies are fast becoming an integral part of the global asset management landscape. In this report, we provide an introduction to, and critique of, the factor investing paradigm in a South African setting. We initially discuss the general factor...

This paper tackles a core question of portfolio management: How ‘active' is an active portfolio? To answer this question holistically, we generalise the idea of Active Share by keeping the same calculation methodology but substituting in different types of portfolio and benchmark ‘weights'....

A general theoretical and empirical framework is developed for assessing the potential of a vertically integrated firm to foreclose downstream competitors. Using this framework a policymaker may also evaluate the empirical welfare effects from a vertically integrated firm raising rivals' costs....

The performance of dynamic trading and investment strategies can be difficult to predict. Although not without its problems, analysis of the historical performance of a strategy can provide valuable insight into its general risk and return properties. Furthermore, historical analysis allows one...