Published on: 7th May 2025
Author: Gianni Parisi, Andrea Landini
This white paper examines how rising volatility in the U.S. Treasury market, triggered by the Federal Reserve’s 2024 easing cycle, affects the stability of the Treasury basis trade, a leveraged arbitrage strategy involving cash bonds and futures. We explain the mechanics of the trade, its reliance on repo financing, and why it becomes vulnerable during periods of market stress. Using a dynamic stochastic model, we analyze optimal investor behavior under volatility-normalized dynamics and explore how policy tools, such as Fed backstop facilities, aim to prevent disorderly unwinds and safeguard financial stability.
Published on: 15 January 2025
Author: Andrea Landini
This study introduces a neural network framework for estimating parameters in jump-diffusion models of asset prices. Using OHLC data, the model refines key parameters (drift, volatility, jump intensity, and jump size) by minimizing the difference between simulated and actual prices. This approach effectively captures both continuous market trends and sudden jumps, providing a robust tool for modeling complex financial dynamics.
Published on: 21 January 2025
This study explores a dual-neural-network system for ETF analysis, integrating top holdings scoring and fund-level selection. Leveraging financial metrics such as EPS, EBITDA, and Net Income, the framework ensures comparability across ETFs and optimizes portfolio selection. The results demonstrate robust performance in aligning ETF choices with investment goals.
Published on: 10 November 2024
This paper examines carry trade strategies, focusing on market reactions to interest rate changes and currency interventions. It explores how carry trades leverage interest rate differentials, with investors borrowing in low-yield currencies to invest in higher-return assets. The study reviews types of carry trades, such as currency and asset-based, and discusses risks like currency, interest rate, and liquidity. The Dollar-Yen carry trade, affected by Bank of Japan interventions, illustrates the strategy's volatility.