Dynamic Credit Spread

Trends in economic activity and default rates are causing trending in credit markets. Trending can start to accelerate strongly, particular in stressed markets. The natural negative skew of credit returns often leads hedgers to overreact to small perturbations, generating a self-fulfilling trend. The strategy captures the spread between High Grade Corporate Bonds and High Yield Corporate Bonds and dynamically adjusts the exposure based on short term trending signals. This can provide effective disaster insurance when credit spreads start widening. The strategy is implemented using primarily credit index and/or credit default swaps.

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Future Value Capital LLP
3rd Floor, 60 Sloane Avenue
SW3 3XB London
United Kingdom

+44 203 608 27 98