Performance and persistence of commodity trading advisors: Parametric evidence

in Journal of Futures Markets (2010), 30(8), 725-752

We re-examine the performance of Commodity Trading Advisors (CTAs) over the January 1995 to October 2008 period. We compare abnormal performance based on a number of alternative existing models, as well ... [more ▼]

We re-examine the performance of Commodity Trading Advisors (CTAs) over the January 1995 to October 2008 period. We compare abnormal performance based on a number of alternative existing models, as well as a category-specific model introducing asset-, option-, and moments-based factors. Taking more factors into account significantly raises the explanatory power, and 9 out of 12 CTA categories significantly outperform the market. We find that numerous CTAs show persistence over a horizon of at least three months and they are also more likely to be persistent over a longer period. Yet, most of the persistence fades away upon the “acid test” of considering only the top and bottom quartiles of CTAs. [less ▲]

The credit risk components of a swap portfolio

in Journal of Futures Markets (2004), 24(1), 93-115

Thanks to the recent development of analytical pricing models for swaps with bilateral credit risk, a comprehensive analysis of the dimensions of default risk has become possible. Using the model ... [more ▼]

Thanks to the recent development of analytical pricing models for swaps with bilateral credit risk, a comprehensive analysis of the dimensions of default risk has become possible. Using the model developed by Hubner (2001) for IRS and CS, this article investigates the impact of structural and temporary credit risk changes on swap prices. It emphasizes that large variations in swap values and sensitivities may exist depending on the sources of credit risk differences between the counterparties. This phenomenon is stronger for CS because of the exchange of principal and an additional correlation risk that exhibits a nonnegligible impact on the contract value. The influence of a netting master agreement also can be analyzed for a wide range of initial contract values and netted notionals. The results confirm the hedging properties put forward by Duffie and Huang (1996) as a special case, but clearly show that they cannot be generalized to any netting pattern. Prevailing market conditions are shown to play a central role in the effectiveness of netting as a hedging device. (C) 2004 Wiley Periodicals, Inc. [less ▲]