GM44: Insights From Inside Credit Suisse ft. Mika Kastenholz
Top Traders Unplugged
Niels Kaastrup-Larsen
4.8 • 712 Ratings
🗓️ 7 June 2023
⏱️ 63 minutes
🧾️ Download transcript
Summary
Our guest Mika Kastenholz shares his insights running a global, cross-asset class macro trading business within a major investment bank in this episode. We learn about potential volatility mismatches in the equity index and fixed income markets, distortions in the yield curve caused by regulatory changes, and a general decline in the appetite for risk taking in the banking sector post-2008. Mika also discusses the viability of crisis prediction using quantitative models, and positioning risk in the convertible bond market. This episode offers a rare perspective into the way a major sell side player thinks about risk and opportunity.
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Episode TimeStamps:
02:20 - Introduction to Mika Kastenholz
09:25 - Working with econophysics
10:52 - Finding the perfect size
12:05 - Mika's view on naive sizing
13:19 - The macro perspective
16:27 - Depressed commodities and the inverted yield curve
18:46 - A changing environment
21:01 - The impact of post 2008 regulations
23:29 - Hedging the autocallable structures
29:30 - Mika's approach to convertible bond arbitrage
31:42 - Swing options - a relic of the past?
33:30 - Has the depth of the markets decreased?
35:31 - How does cross margining work today?
36:51 - What happens with a large client trade?
38:59 - Dealing with regulations
42:51 - Are banks too focused on short-term dynamic risk management?
45:48 - What if every bank had the same risk limits?
48:15 - Are the banks aware of network effects?
50:13 - Is the complex systems push overstated?
54:09 - An anomaly that could be exploited?
57:06 - A confused market
59:19 - The outlook for the term premia
01:01:10 - Key takeaways from Niels
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Transcript
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| 0:00.0 | At the end of the day, it's really much about the volatility of inflation going forward and the level of inflation. |
| 0:16.2 | So if we continue to be in this elevated inflation environment for much longer, I think the |
| 0:23.6 | rates volatility that we see is going to persist. |
| 0:27.5 | But at some point, if that's the case, then indeed the expectation of the market that we're |
| 0:31.1 | going to get rate cuts between 1 or 2 percent over the course of the next 12 months cannot |
| 0:35.2 | play out. |
| 0:41.0 | Imagine spending an hour with the world's greatest traders. |
| 0:45.5 | Imagine learning from their experiences, their successes, and their failures. |
| 0:47.5 | Imagine no more. |
| 0:53.9 | Welcome to Top Traders Unplugged, the place where you can learn from the best hedge fund managers in the world, so you can take |
| 0:54.9 | your manager, due diligence, or investment career to the next level. Before we begin today's |
| 0:59.9 | conversation, remember to keep two things in mind. All the discussion we'll have about investment |
| 1:04.6 | performance is about the past, and past performance does not guarantee or even infer anything |
| 1:09.9 | about future performance. |
| 1:11.5 | Also understand that there's a significant risk of financial loss with all investment strategies, |
| 1:15.8 | and you need to request and understand the specific risks from the investment manager about |
| 1:20.7 | their product before you make investment decisions. |
| 1:23.6 | Here's your host, veteran hedge fund manager, Niels Kostrup Larson. |
| 1:33.3 | Welcome and welcome back to another conversation in our series of episodes that focuses on markets and investing from a global macro perspective. |
| 1:42.8 | This is a series that I not only find incredibly interesting, |
| 1:46.7 | as well as intellectually challenging, |
| 1:49.1 | but also very important, |
... |
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