Revenue Rise with Loans

A special situation occurs in the high-yield sector. The illiquidity in large parts of the universe causes price lags meaning that the aforementioned small changes in credit quality are not immediately reflected in bond prices. In the economic literature, this effect is known as non-trading. With respect to high-yield indices non-trading and non-synchronous trading of [...]

Mean–variance analysis, made popular by Markowitz and Sharpe, has been the basis for the process of portfolio optimization since the 1990s. Yet, the method itself suffers from various pitfalls. Among others it ignores deviations of the return distributions from normality. The asymmetric risk profile of corporate bonds and the illiquidity of certain segments of the [...]

Clearly investors willing to allocate a part of their budget to corporate bonds are facing two questions. First, they have to decide how much of their budget they want to invest in corporate bonds. In this context we will focus on a pure fixed income portfolio. Usually private as well as institutional investors define their [...]

Yet, free cash flow numbers are not available for all companies. European firms, for example, historically have published only profit figures. Therefore, we also look at EBIT and EBITDA figures. Of these two the latter is preferred because it deducts cash that is needed to maintain the operations. Specifically, on the macro level we use [...]

So far, we have identified a close correlation between credit spreads and future economic activity. When the economy is growing, usually each sector benefits from that growth. In the labor sector, economic growth typically leads to falling unemployment and rising wages. Historically, the corporate sector has benefited particularly during economic expansions. Not only did corporate [...]

Money market funds are not government guaranteed. Betrayal is a slight risk with money market funds. In rare instances, the dollar value gets broken. Money market funds are a collection of the highest-rated, 90-day, commercial debt and government paper. By law, money market funds must have 95 percent of their assets in top-rated debt. Still, [...]

Ideally, during the time you own short-term securities you will have only a sense of confidence that your dollar is always worth a dollar and your interest, however small, is always accumulating. When this confidence is threatened, expect powerful emotions including a sense of betrayal and a loss of faith. When the dollar value of [...]

Though savings trigger intense emotions, trigger events for the intense emotions are rare. In addition, the number of emotions triggered by savings accounts, CDs, and money market funds is small. Short-term savings investments are sold as security. If you need predictability, these are the investments for you. One dollar invested here should always be worth [...]