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Our experts frequently write blog posts about the findings of the research we are conducting.

Displaying 11-20 out of 74 results for "Volatility Products".

SLCG Research: Structured Product Indexes

(Nov 2013)

Most research on structured products focuses on what is known as initial date mispricing -- the difference between what a product costs and how much it is worth, as of the issue date. If you look at any of our structured product reports (let's take this reverse convertible, for example), you can see that the product was issued at a price of $1,000, but that the present value of its resulting cashflows only comes out to $960.40. The difference, $39.60 or 3.96%, represents an expected loss to...

How to Value a TIC

(Oct 2013)

For our second post of TIC Week, we would like to describe how to calculate purchase-date valuations of TICs. The vast majority of TIC offering documents include cash flow projections. As we described last week, we can use discounted cash flow analysis to determine the present value of the property based on those projections. While the cash flows from TIC investments are more complicated than those of simple coupon-paying bonds, the underlying analysis is essentially the same.

Discounted cash...

Just How Risky Are Leveraged and Inverse ETFs?

(Oct 2013)

Leveraged and inverse exchange-traded funds (ETFs) are some of the most volatile securities traded in public markets. They are designed to track a specific index, except multiplying daily return of the index by a positive (leveraged) or negative (inverse leveraged) factor. The 'daily' part is important: leveraged and inverse ETFs do not track the leveraged or inverse return of the index for any period longer than a single day due to portfolio rebalancing. You can find more details about...

FINRA's Conflict of Interest Report

(Oct 2013)

On Monday, the Financial Industry Regulatory Authority (FINRA) published their Report on Conflicts of Interest "to better understand how [a number of a large firms] manage conflicts of interest and to identify effective practices to manage those conflicts." The report details observations made in connection with FINRA's targeted examination letter in July 2012 as well as in-person meetings resulting from that letter.

The report makes it clear that a well-defined framework is necessary for...

The JOBS Act and Private Placement Advertising

(Oct 2013)

As per rules adopted in line with the 2012 Jumpstart Our Business Startups Act (JOBS Act), hedge funds and other private placements can now advertise to the general public. We have been covering this issue extensively here on the blog. While many sources suggested that this would unleash an immediate flood of new marketing, several sources have noted that there has in fact been remarkably few hedge fund advertisements so far.

Why? There could be several reasons. The first is that while the...

Fidelity to Launch Mutual Fund Based on Hedge Fund Strategy

(Oct 2013)

We see it again and again: complex investment strategies packaged into traditionally conservative investments. We have seen corporate debt linked to exotic derivatives positions (structured products), exchange-traded products linked tocomplex futures positions (commodities and volatility ETPs), variable annuities linked to options strategies (structured product based variable annuities), and even certificates of deposit with complex payoff structures (structured CDs). Now, we are seeing more...

SEC Litigation Releases: Week in Review (Part I) - October 4th, 2013

(Oct 2013)

SEC Files Fraud Charges Against Universal Travel Group, Its Former CEO and Chair, Jiangping Jiang, and Its Former Director, Secretary and Interim CFO, Jing Xie
September 27, 2013, (Litigation Release No. 22823)
The SEC announced the filing of "fraud and related charges against Universal Travel Group, a China-based travel services company, its former CEO and Chair, Jiangping Jiang, and its former Director, Secretary and Interim CFO, Jing Xie." According to the SEC, Jiang and Xie "failed to...

SEC Approves Municipal Adviser Registration Requirement

(Sep 2013)

Late last week, the Securities and Exchange Commission (SEC) voted to adopt rules requiring municipal advisors to register with the commission if the advisor "provides advice on the issuance of municipal securities or about certain 'investment strategies' or municipal derivatives." This permanent registration requirement was required by Dodd-Frank (Section 975) and replaces the temporary registration requirement previously implemented by the SEC.

The registration requirement is meant to...

What is Black-Scholes, Anyway?

(Sep 2013)

In the past, we have reviewed the basics of options as well as included some discussion of more exotic options, such as binary options and barrier options, but we haven't talked in detail about option pricing. There are a lot of great models for valuing options, but they can be a bit intimidating for the uninitiated, even though the underlying ideas are simple.

Any option's value is dependent upon the probability and timing of payouts. For example, how much would you be willing to pay for an...

FINRA Investor Alert: Private Placements

(Sep 2013)

Many of the riskiest financial products we have seen are sold as private placements. Generally speaking, private placements are investments sold directly to accredited investors, and are not registered with the SEC. Private placements include hedge funds, oil and gas partnerships, private real estate investment trusts, and other speculative investments.

Yesterday, FINRA released an Investor Alert on private placements. In it, they warn investors that sales abuses and even fraud have been...

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