Blog

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

Displaying 101-110 out of 201 results

Morgan Stanley's Excessive Municipal Bond Markups

(Aug 2013)

Yesterday, FINRA fined Morgan Stanley for best execution and for charging excessive markups or markdowns. We have been covering markups extensively, and we have taken the Morgan Stanley municipal bond transactions identified by the FINRA action and applied our markup calculation methodology to calculate the distribution of markups charged by Morgan Stanley.

Let's start with an example. FINRA flagged a customer purchase of $145,000 in a West Virginia municipal bond (CUSIP: 95639RBW8) on...

Do Leveraged ETFs Increase Stock Market Volatility?

(Aug 2013)

Leveraged exchange-traded funds (LETFs) are controversial investments. Because they can be leveraged as much as 3x, and can be linked to highly volatile underlying assets, their daily price movement is typically very dramatic. Also, LETFs tend to lose value over time if their underlying assets are relatively volatile due to rebalancing effects, something we've covered in our blog post "Leveraged ETFs", as well as in our research papers, "Leveraged ETFs, Holding Periods and Investment...

Structured CD with an Exotic Embedded Option

(Aug 2013)

In the past few months, we have constructed a database of thousands of structured certificates of deposit (CDs). We have analyzed and evaluated hundreds of these CDs and have compiled these results into a recently completed study . Our results indicate that structured CDs are usually issued at significant discounts to face-value (comparable to structured products), offer little if any market exposure and are often less valuable than contemporaneously issued fixed rate CDs.

We've recently come...

Municipal Bonds Trading in ETFs

(Aug 2013)

About a month ago, we spent a full week highlighting research conducted at our firm that shows the degree to which investors are harmed by excessive markups in municipal bond trading. In the paper, our colleagues argue that low-cost improvements in disclosure requirements could largely eliminate these transfers of wealth from taxpayers and investors to the brokerage industry.

After the research was completed, we began thinking about other ways investors gain exposure to municipal bonds. For...

Calculating Retirement Income and Fees from a 401(k) Account

(Jul 2013)

Saving for retirement means asking a lot of questions.

What monthly income will you need? Forbes claims this is the fundamental question that is often overlooked by 401(k) account holders.

"The lump sum in your 401(k) may seem like a lot, but when you translate it into a monthly income stream over 20 or 30 years, it may not be as much as you think," [Jeanne Thompson of Fidelity] says. "Breaking it down into how much the money will provide will give you a much better picture of how much you'll...

Why Banks Are Storing Physical Commodities, and Why it May Matter

(Jul 2013)

Physical commodities -- barrels of oil, bars of gold, bushels of wheat, etc. -- are used for a variety of industrial purposes, but can also be bought and sold in financial markets. Most commodities trading involves futures contracts, as trading the physical commodity itself involves transportation and storage costs. Traditionally, banks who traded commodities were only allowed to deal in derivatives such as futures contracts, rather than dealing in the physical commodity itself.

But since the...

The Basics of Insurance Linked Securities

(Jul 2013)

Financial innovation is typically associated with banks, but lately we've seen a number of new financial products developed and sold by insurance companies. Some of the most interesting products are known as insurance-linked securities, or ILS.

In the broadest sense, ILS transfer risk from insurance companies to investors. The largest segment of the ILS market is in catastrophe bonds (or 'cat bonds' for short), whose interest and principal payments depend on a specifically defined natural...

Misrepresentation of Asset Quality in RMBS

(Jul 2013)

Investors in Residential Mortgage Backed Securities (RMBS) have suffered tremendous losses since 2007. Many junior and mezzanine investors were wiped out by the asset pools' delinquency rates coupled with the subordination embedded in these structured securities. Since then, there has been a proliferation of litigation alleging that the underwriters and originators of RMBS misrepresented the risks of these products. An interesting new paper by Professors Piskorski and Witkin of Columbia...

Similar Structured Product Premia in US and Europe

(Jul 2013)

One point we've made again and again in our research is that structured products -- debt securities with market-contingent payoffs -- tend to be priced at a premium to face value. We have documented premia in reverse convertibles, autocallables, absolute return barrier notes, principal-protected notes, dual directionals, and over 17,000 individual products freely available in our searchable structured product database.

Recently, the SEC has required structured product issuers to disclose an...

VelocityShares' New Volatility ETFs

(Jul 2013)

You've heard it here before: hedging equity exposure with volatility derivatives is very tricky.

While the CBOE Volatility Index (VIX) and the S&P 500 are negatively correlated suggesting a possible hedging opportunity, you cannot invest in the VIX itself, you have to invest in derivatives (futures or options) linked to the VIX. The simple fact is that this indirect exposure to the VIX does not behave like the VIX itself, making it in the end a rather poor hedge to equities .

But issuers of...

201 Results

<
1
...
9
10
11
12
13
...
21
>