
David Dredge On Defining Risk, Profiting from Extreme Moves, and Convexity
Macro Hive Conversations With Bilal Hafeez
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I Like Your Idea of X Versu F of X
The relationship between economic fundamentals and markets is so unstable that you actually don't know how it's going to map. In n f x ers, as famous paper by mis rogoff in the early 19 eighties, they where they ran all these models on f x forecasting. And what you'll find is there's virtually no impact to returns in virtually all the outcomes of that underlying. The only impact in returns is the outcomes that are in the two per centile wings. But the guy who had positively convex risk, where he was protected on the downside and participative on the upside, performs very, very well on the wings.
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