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Bassman: When Markets Implode, Short Convexity Lurks Near Crime Scene
Investment managers display a bias to being short Convexity; a payoff profile where the losses can be greater than the gains. Thus, it may not be a coincidence that when financial markets implode, short Convexity can be found lurking near the scene of the crime.
Lurking at the Scene
A Commentary by Harley Bassman
As detailed in “Seeking Treasure with Convexity” – February 23, 2021, an investment is convex if its payoff is asymmetric for equally opposite outcomes. So, if there�
Thanks for sharing this. A great primer for rookies and brush-up for us geezers.
But don’t “valuations” and cash flow versus debt determine asset prices? (To quote my favorite E-Trade advert, “That was a joke, sir!”)
Hi
Where does the divide by 16 come from?