Monday, February 24, 2020

Blending trend-following and carry through simple diagrams







The value and cost of trend-following can be shown through a simple set of diagrams. The value is convexity. The cost is associated with the periods of poor or no trends. The costs can be offset through employing carry strategies that are concave. An investor can trade-off between concave and convex strategies to find the right pay-off function.

No comments: