Equity Risk Premium

23 thg 10, 2020

Inspired by the article "2020's Best Performing Hedge Fund Warns Of 'Incredible Move' Around The Election" from ZeroHedge:

This script explores the relationship and attempts to find dislocation between equity risk (VIX) and high-yield corporate debt risk (VXHYG, The Cboe VXHYG Index is an estimate of the expected 30-day volatility of the return on iShares' High Yield Grade ETF (HYG). VXHYG is derived by applying the VIX algorithm to options on HYG).

The basic logic is (closing price of VIX / closing price of VXHYG) - 1. When equity risk is high and credit risk is low, the value of premium will be high, and vice-versa.

“'Equity volatility is almost inescapably high. Is that a good form of insurance? The payoff profiles are nothing like they were back in January. Whereas in credit, we’re almost back to where we were in January.

I find today the risk-reward profile of credit to be basically among the worst, relative to other things, I’ve seen in my career,' Weinstein said. 'A VIX at 20 used to be quite a feat. Here we are at 30, and the credit market hasn’t blinked.'

As a result of the gaping divergence between the VIX and credit spreads - the two had moved in tandem for years, but in August the two series blew out as the VIX started rising as spreads kept falling - Weinstein has pounced on the trade, betting on vol compression."

When equity risk premium is high, the market may be forming a local top.
When equity risk premium is low, the market may be forming a local bottom.

Make sure to select your current timeframe on the dropdown menu.

16 thg 12, 2020

Phát hành các Ghi chú

Updated to include an option for repainting -- default value is true, meaning the script will repaint the current bar.

False = Not Repainting = Value for the current bar is not repainted, but all past values are offset by 1 bar.

True = Repainting = Value for the current bar is repainted, but all past values are correct and not offset by 1 bar.

In both cases, all of the historical values are correct, it is just a matter of whether you prefer the current bar to be realistically painted and the historical bars offset by 1, or the current bar to be repainted and the historical data to match their respective price bars.

As explained by TradingView,`f_security()` is for coders who want to offer their users a repainting/no-repainting version of the HTF data.

16 thg 12, 2020

Phát hành các Ghi chú

Added the option to use (VIX - VXHYG) instead of (VIX/VXHYG)-1.

Also added a zero-line.

3 thg 1, 2021

Phát hành các Ghi chú

Removed the timeframe input to simplify the script.

10 thg 1, 2021

Phát hành các Ghi chú

Added AMEX:HYG as an option for credit risk.