Bond investors often talk about duration and maturity of bonds when evaluating a single bond or a bond portfolio. Generally speaking, duration and maturity are two key concepts in bond investing which refer to different aspects of a bond’s timeline and sensitivity to interest rate changes. With regard to this, it is worthwhile to look more closely at these two measures.   Duration The duration is a measure for the sensitivity of a bond (portfolio) to interest rate changes. It represents the weighted average time it takes for an investor to receive all the cash flows (interest payments and principal

Within the current macroeconomic environment where central banks around globe have started to lower interest rates, bond funds and ETFs have become popular investment choices for all kinds of investors. However, their performance is influenced by a variety of risk and return factors that investors need to understand. The first to mention is obviously the interest rate risk. Every investor should bear in mind that bond prices and interest rates move inversely, meaning rising rates can lead to losses, while falling rates increase bond values. A measure to determine the degree of a bond fund’s sensitivity to interest rate changes

In short, cryptocurrencies such as Bitcoin or Ethereum are digital or virtual currencies that use cryptography for security and operate on decentralized networks. These networks are normally based on a digital ledger technology, the so-called blockchain. Unlike traditional currencies (fiat money) which are issued by governments, cryptocurrencies have so far been launched by corporations or people. They are typically decentralized and rely on peer-to-peer networks for transactions and their validation. This mechanism helps make them resistant to fraud, central control, or interference. Despite these protection mechanisms, investors have witnessed that not all cryptocurrencies were resistant against fraud in the past.

The terms risk tolerance or risk-bearing capacity are often used when it comes to portfolio advice. Both terms can be used as synonyms since both refer to the personal ability of an individual investor to tolerate and handle investment risk in their portfolio. This means the risk tolerance of an investor refers to the degree of variability in investment returns that an individual is willing to withstand in their investment portfolio. It reflects the investor’s capacity and willingness to endure losses or fluctuations in the value of their investments. To determine the personal risk tolerance or risk-bearing capacity of an

Understanding the risks implied for a portfolio is key for the success of an investment strategy. Nevertheless, most investors talk about the terms “general risk” and/or “market risk” when talking about investing in the securities markets. But literally no one explains what this means or refers to the specific risks which need to be taken into account for a specific investment. This article provides an overview of the most important specific risks which can impact an investment. The term “investment risk” is defined as the possibility of losing some or all of the original investment amount, or the potential for

U.S. equity investors in the six year period between 1973 and 1978 would have made no nominal return on their investment, with inflation averaging 7.7%. Hence it is understandable that investors remain so concerned about the potential impact of a higher rate of rising prices. This is why all eyes are currently on the bond market and whether it is signalling a return to the 1970s, and whether firms will be able to maintain and grow profit margins. No need to panic The U.S. February 2021 inflation data showed an increase of 0.4%, resulting in an annualized consumer price index

In the early days of the pandemic, Fathom advocated that substantial fiscal support packages be put in place to support firms and workers affected by the necessary public health response to COVID-19. By and large governments, particularly in the developed economies, have delivered up to now. With identified cases rising rapidly, many countries in Europe have started to reimpose restrictions on economic activity, albeit at the local rather than the national level. It remains to be seen whether support packages on a par with those seen earlier in the year will be offered. Nevertheless, with government financing costs at record

Fathom’s Financial Vulnerability Indicator (FVI) is a comprehensive measure of financial vulnerability, spanning 177 countries and has been developed using state-of-the-art modelling techniques. It is a measure that covers four types of financial crisis: banking, sovereign, currency and sudden stop. It allows us to look at a country’s vulnerability to each of these crises relative to other countries and their own history. The FVI can be used as a tool to manage risk, understand evolving market trends and identify investment opportunities. Given a view of the prevailing market conditions (i.e. risk on/off), the FVI is uniquely placed to select winners

For this week’s News in Charts, we take a snapshot of some of the factors which affected financial risk across the world in the week ending 15 February. Using Fathom Consulting’s Financial Vulnerability Indicator (FVI), we can assess the vulnerability of 177 countries to four types of financial crisis (banking, currency, sovereign and sudden stop). The FVI is a comprehensive tool used by Fathom for client-specific research and consultancy projects. Refinitiv Datastream users can access a composite measure of the FVI on the Chartbook. Venezuela has frequently been flagged up by our Sovereign FVI reflecting increased uncertainty about its ability to

Blackstone is taking out an insurance policy of sorts in its takeover of Thomson Reuters’ financial-data division. The $20 billion buyout comes with features that enhance the Canadian seller’s upside if things go well, but leaves it with relatively more of the downside if they don’t. Steve Schwarzman’s investment firm is injecting $3 billion of equity alongside some co-investors to buy a 55 percent share of the Financial and Risk unit (F&R), now known as Refinitiv. Thomson Reuters, the parent company of Reuters, which includes Reuters Breakingviews, will keep a $2.5 billion stake. Blackstone also puts in $1 billion through

Exxon Mobil’s strategy has yet to deliver returns. Despite a rise in global crude prices, the world’s largest listed, independent oil company missed earnings expectations in the first quarter as production declined. Exxon’s focus on long-term projects may eventually pay off. But investors seem less confident and competitors are passing it by. The $340 billion oil major did manage to grow earnings by 16 percent compared with the first quarter of 2017, but that’s nothing to shout about considering that crude prices were nearly a 50 percent higher than this time last year. By contrast, Chevron on Friday reported a

The labors set by King Eurystheus for Hercules were meant to be impossible. The terms Qualcomm has set for hostile suitor Broadcom are in a similar vein. Unless Broadcom boss Hock Tan can call on the same superhuman assistance as the mythical Greek hero, Qualcomm’s gesture of cooperation doesn’t much increase the odds of a successful takeover. Qualcomm’s chairman, Paul Jacobs, said on Monday that with a few tweaks, rival chipmaker Broadcom’s offer of just under $120 billion would be palatable. Most of the requests are pretty reasonable, like boosting the fee Broadcom would pay if a deal fails to