The ‘Original Sin’ an unavoidable path?

Despite EM and AxJ portfolio managers praising Asia's stronger reserve balance, covered foreign currency exposure, leading growth rates and political stability, there are still some who would panic on the withdrawal of liquidity from the Fed and ECB - the authorities who controls the supply of USD and EUR that are the most internationalised currencies. …

Recap: Trading the Curve jargons

Short end vs. Long end As you come across short rate interest rate mean-reversion models i.e. Hull-White model that has a time-dependent long term rate and time-dependent short term rate, there are short term policy rates that prices expectations of changes in policy rate that transmits through the entire curve, as well as the long …

Will Draghi pull the lever and hike rates? ECB Deposit facility rate

It used to be a bane for short-term rate models to have negative interest rates. Cash has alternatives besides holding debts with a fixed income and naturally, creator of the closed form analytical formula to tight pricing options with its sensitivity parameters to market variables and its underlying, Fisher Black, used the max(Shadow rate,0) to …

Renminbi (RMB) and its confounding trilemma tradeoffs

Let's hear a story on China and its currency. In 2015 only, China's official foreign exchange reserves¬†lost 512.7 billion US dollar. The rapid depletion of the foreign reserves in 2015 led to a turnaround of public opinions, from whether there is welfare loss in having excess foreign reverses, to whether the foreign exchange reserves were …

Reconciling interest rate parity and the real world

We all ever once heard contributors at Bloomberg talked about ineffectiveness of the Taylor rule to prompt Fed hiking earlier, or your macroeconomics professor talking on Purchasing Power Parity and Interest Rate Parity. Seems like a knowledge that would allow an undergraduate to make side incomes from tracking the rate differential. But that's unlike reality …