What is best practice for matching annuities in Greece in 2012?

Best practice for matching non-profit annuities in most countries, certainly from a risk perspective, is still to cash flow match (or at the very least, match key durations) using government bonds. The theory is that the insurer isn’t then exposed to changes in the term structure on interest rates, only exposed to illiqudity/reinvestment risk to […]

Greek default?

So European politicians have more or less agreed a deal which may, more or less, push some of their problems to one side for a period. Yes, I’m not madly optimistic about this as a cure-all.  This is not the end of the Euro problems. Part of the deal is a “50% loss for private […]

Golden Stories

Gold has had a fantastic run, getting to within sight of $2,000 recently. Many see this as a clear indication of hyper inflationary pressures arising out of loose monetary policy. The informed recognise that you can’t have hyperinflation if all sensible measures of actual prices other than a particular, volatile commodity are showing very low […]

Surveys, papers and books on the ERP

Some interesting papers on the ERP: Market Risk Premium used in 56 countries in 2011: a survey with 6,014 answers Interesting not least because it is a survey of required Equity Risk Premiums (or Market Risk Premiums) rather than expected. The rates are higher than I use, although this is also useful information when attempting […]

Book Review: This Time is Different

It’s chock-full of analysis, numbers, tables and charts showing how as much as things change, the scope for financial crises changes very little. The comparison of Developed and Emerging Markets is particularly interesting in that the differences, while they do exist, are far smaller than stereotypical views. Emerging Markets do tend to have more ongoing sovereign defaults, but the frequency of banking crises is little different. Weirdly, some aspects of Emerging Market crises (such as employment impacts) are less than average for the Developed World.

The Alpha and Inflation of Commodities

Commodity prices rise and the world screams hyperinflation. Elsewhere, alternative investment managers espouse the virtues of commodities as an asset class that generates “alpha” returns (i.e. returns not related to the overall direction of markets). The thing is, it’s hard to have it both ways.  The link between unexpected/expected inflation and equity prices in the […]

Fixed Interest is a viable asset class

I heard someone talking on Classic Business tonight. Pity I didn’t catch his name so I can avoid his advice in future. He was saying that he doesn’t see the point in investing in debt instruments.  He explained that the return is low and the risk high since if the company gets into trouble, you’ll […]