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  Issue 12 | Archive August 2012

Public Lecture on Global Macro Strategies

About 70 participants from both industry and academia attended the NUS RMI Public Lecture on 8 May 2012. The talk on “Managing Global Macro Strategies in a Changing Market” was delivered by Mr. Jonathan H. Clark, Vice Chairman of FX Concepts LLC, a New York-based research advisory and investment management firm.

Mr. Clark started by introducing the FX markets as being the most efficient globally, operating on a 24-hour-basis, and having low transaction costs that allow strategies which would otherwise not be feasible in other markets. Of late, he observed that the focus on similar underlying macro-economic factors and government intervention in currencies have resulted in increased correlations between asset classes, neutralizing the benefits of diversification. To meet such a challenge, he suggested combining some un-correlated strategies, including carry, monetary policy, value, intra-day trend, and volatility prediction strategies.

Additionally, Mr. Clark shared his views on managing tail risks using currency options. With implied volatility of around 8-11%, as compared to equity options’ implied volatility of about 25%, currency options offer a cheaper alternative in hedging against equity tail risks. Notwithstanding the fact that currency options are a cheaper alternative, as he pointed out, it is still crucial that the use of such options does not lead to excessive “bleeding”. He suggested using at-the-money options instead of out-of-the-money options, selectively buying options when they are cheap, and using relative value strategies as a way to offset the cost of buying protection. An example is to use long-dated at-the-money straddles for lowering strategy “bleed”.

Second Run of Workshop in Credit Risk and CVA in Practice

RMI launched the second run of the Workshop in Credit Risk and CVA in Practice, in response to its successful inaugural offering on 9 and10 April. A total of 15 participants attended the workshop conducted by Prof. Poon Ser-huang from University of Manchester and Frankie Phua, Head of the Credit & Country Risk Management Division at UOB.

Different from the previous run, the July Workshop attracted delegates from a wider range of industries such as an agricultural commodity trading firm and energy traders, who also found the subject relevant to their daily business.

The content of the workshop also evolved over the two runs with RMI and trainers actively responding to participants’ feedback. Many shared that they appreciated both the illustration of calculation methods as well as the sharing of market practice such as the tension between regulatory and pricing issues. “I liked the practical mathematics, spreadsheet, and the good Q&A session”, noted one participant.

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Published quarterly by Risk Management Institute, NUS
Editor: Ivy Wang (rmiwy@nus.edu.sg)