Inflation and Purchasing Power

Different goods and service have different inflation ratesInflation usually refers to Consumer (or Producer) Price Index which is a broad-based measurement of inflation across goods and servicesInflation measures the increase in price of goods or services.If $1 could buy an apple last year and inflation was 50%. This year, the…

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Inflationary Assets

Previously, we have went into what is inflation and its causes.In this article, we will be going into the asset classes that perform in times of inflation. Cash is Trash Cash would always have 0% return. And especially in times of inflation, cash could be seen as having negative real return.Investors…

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Growth Stock & Interest Rate

Growth stocks are priced in with explosive growth expectationDue to discounting effect, future earnings are prone to changes in interest rate. When interest rate raise, these future cashflows would be heavily discountedGrowth stocks are highly dependent on their future earnings/cashflows.It is not rare to see that when companies release their earning report, that…

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Time Value of Money

If given a choice, would you rather receive $1,000 today or $1,000 a year later? With simple intuition, we know to receive it today. After all, if we are going to receive the same amount regardless, why should we not receive it today? It could be used to business or…

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Discounted Future Cashflow

Previously, we have discussed the discounting of one future cashflow to its present value.In this blog post, we will be going into:How the discounting of future cashflows of a bond's coupon determine its priceHow the change of the bond yield (risk-free rate) affect bond price  Discounting Coupon Payout For bonds,…

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COVID-19 Crash: Tail Hedge and the Convexity within IV

Put options are one of the main tools used in hedging against a black-swan event, a market crash with unpredictable cause and severe impact.The recent COVID-19 market crash where the SPY crashed 33% from 340 to 228 is an example of a black-swan event. Unpredictable with severe impact. Almost all…

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Suppression of Volatility and its Hidden Dangers
The Great Snake of Risk

Suppression of Volatility and its Hidden Dangers

What do you associate low volatility with? A bull market? A slow and steady upward rally? Optimistic future outlook? Do you associate it with the suppression of volatility? We know that there is a strong inverse relation between equities and volatility, a low volatility would therefore also mean that there…

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What is Volatility and Why it Matters?

Volatility is a measurement of risk in the stock market, high volatility would translate to a higher probability of the extreme events of striking it rich or going broke. Is this really true? In the next article, we will explore the mechanics which drive volatility lower and find how volatility…

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