Top Traders Unplugged
GM55: What Investors Need to Know about 2024 ft. Dave Dredge & Cem Karsan
Jan 17, 2024
Renowned risk management experts Dave Dredge and Cem Karsan discuss the current market climate and the importance of long volatility and owning convexity in investment views. They also tackle the consequences of government debt and the challenges faced by central banks. The speakers explore the risks of unwinding non-recourse leverage and delve into the potential impact of expanding volatility in areas like FX and equity. A must-listen for investors looking for insights into the year ahead.
01:22:12
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Quick takeaways
- Incorporating convexity and long volatility strategies is crucial for optimizing investment portfolios and preparing for extreme market events.
- The period of volatility suppression and price stability is ending, with structural changes in the global economy leading to potential risks like stagflation and a reversal of flows.
Deep dives
The importance of convexity and compounding in investment portfolios
In this podcast episode, the speaker emphasizes the importance of incorporating convexity and long volatility strategies in investment portfolios. They highlight how traditional investment strategies focused on average returns often overlook the significant impact of extreme market events. By using a football pitch analogy, the speaker explains that the majority of returns come from these rare events and divergences from the mean. They stress the need for portfolios that are optimized for compounding and resilience, rather than solely relying on the mean of expected returns.
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