ReSolve Riffs with Nancy Davis about Convexity Trading, Inflation and IVOL

This is “ReSolve’s Riffs” – live on YouTube every Friday afternoon to debate the most relevant investment topics of the day.

An almost USD 2 trillion fiscal bill is moving ahead in Congress, while breakeven rates rose above the 2 percent mark for the first time since 2018 (with no signs of relenting). It is no wonder that inflation is now top of mind for investors. Uncertainty isn’t limited to whether it reawakens after almost four decades, but how it might manifest and how investors should protect themselves. This week we riffed with Nancy Davis (Managing Partner & CIO of Quadratic Capital Management) who manages the popular IVOL ETF, covering topics such as:

• Her early days as a prop trader for Goldman Sachs, earning her stripes trading derivatives
• What is IVOL: a combination of TIPS and interest-rate options
• Using cash to manage duration
• What is implicit in the shape and slope of the yield curve
• The risk of outliving one’s means – the importance of protecting against inflation
• ‘Backing up the truck’ when volatility is so low
• Linear vs asymmetric – not all derivatives are created equally

Nancy shared her screen throughout the conversation and walked us through her general framework, including what she believes are some of the most relevant features to monitor when navigating the inflation and rates landscape.

Thank you for watching and listening. See you next week.