The project

Systemic Risk and Systematic Value is dedicated to socially responsible macro trading strategies. Macro trading strategies are defined as alternative investment management styles predicated on macroeconomic and public policy events or trends. If the right principles and ethics are applied, social and economic benefits arise from an improved information value of market prices, increased efficiency of global capital allocation and reduced risk of financial markets crises.

SPECIAL: Economic data

Nowcasting GDP growth

Financial markets have long struggled with tracking GDP growth trends in a timely and consistent fashion. However, over the past decade statistical methods for...

FX returns and external balances

A new paper supports the view that currency excess returns can to some extent be viewed as compensation for risk to net capital flows...

The impact of U.S. economic data surprises

A new paper estimated the short-term effects of U.S. economic data surprises on treasury notes and USD exchange rates over the past 20 years....

SYSTEMIC RISK

Building international financial conditions indices

IMF staff has developed global financial conditions indices for 43 global economies. Conceptually, these indices...

Trend following and the headwinds of rising yields

The decline in bond yields over the past decades has supported profitability and diversification value...

Inflation: risk without premium

Historically, securities that lose value as inflation increases have paid a sizable risk premium. However,...

The macroeconomic impact of Basel III

The regulatory capital reform for banks increases capital costs and credit spreads charged on clients....

The global debt overhang

A new IMF report illustrates that a large share of both advanced and emerging economies...

SYSTEMATIC VALUE

Simple international macroeconomics for trading

Simple New Keynesian macroeconomic models work well for analyzing the impact of various types of...

Simple macroeconomics for trading

Most modern dynamic economic models are too complex and ambiguous to support macro trading. A...

The “low risk effect” in financial markets

Low-beta and low-volatility securities can produce superior risk-adjusted returns. Thus, portfolios of calibrated low- versus high-vol...

Explosive dynamics in exchange rates

Explosiveness in financial markets means that prices display exponential growth. In recent years statistical tests...

Understanding negative inflation risk premia

Inflation risk premia in the U.S. and the euro area have disappeared or even turned...

POPULAR POSTS

Trend following as tail risk hedge

Typical returns of a trend following strategy carry features of a “long vol” position and have positive convexity. Typical returns of long only strategies,...

Why the covered interest parity is breaking down

Deviations in the covered interest parity have become a regular phenomenon even in developed markets. Persistent gaps between on-shore and FX-implied interest rate differentials (“cross-currency...

The four components of long-term bond yields

A BOJ paper proposes an affine terms structure model for bond yields under consideration of the zero lower bound. It estimates the contribution of...

The world’s negative term premium

The term premium on the “world government bond yield” has turned decisively negative, according to BIS research. Investors have since 2014 accepted a long-term...

The term premium of interest rate swaps

A Commerzbank paper proposes a practical way to estimate term premia across interest rate swap markets. The method adjusts conventional yield curves for median...

Leverage in asset management

Asset managers can use leverage to enhance returns. Outside hedge funds, such leverage is modest as share of assets under management. However, considering the huge...