The project

Systemic Risk and Systematic Value is dedicated to socially responsible macro trading strategies. Macro trading strategies are alternative investment management styles based on macroeconomic and policy 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 capital allocation and reduced risk of financial crises.

SPECIAL: Bond yields

Analyzing global fixed income markets with tensors

Roughly speaking, a tensor is an array (generalization of a matrix) of numbers that transform according to certain rules when the array’s coordinates change....

The duration extraction effect

Under non-conventional monetary policy central banks influence financial markets through the “portfolio rebalancing channel”. The purchase of assets changes the structure of prices. A...

Understanding the correlation of equity and bond returns

The correlation of equity and high grade sovereign bond returns is a powerful driver of portfolio construction and the term premia of interest rates....

How convenience yields have compressed real interest rates

Real interest rates on ‘safe’ assets such as high-quality government bonds had been stationary around 2% for more than a century until the 1980s....

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Paper finds "significant benefits from using deep learning to form optimal portfolios through certainty equivalent returns and Sharpe ratios. Return predictability via deep learning also generates substantially improved portfolio performance." https://t.co/MroLKeHzCy https://t.co/pibfSLfXcK macro_srsv photo

Study "investigates the true dynamic relationship between the VIX implied volatility index and the S&P500 returns...S&P500 returns have a strong and stable impact on VIX...However, the impact of VIX on  S&P500 returns is almost nil." https://t.co/5nlRnTsGWV https://t.co/2aM5gEgkal macro_srsv photo

"Traditionally, predictive models are....unaware of how predictions will ultimately be used...We propose an integrated prediction and optimization framework for regression coefficients in the context of mean-variance portfolio optimization." https://t.co/0EpcmbIrcO https://t.co/9H1jAnFsO6 macro_srsv photo

TAGS

SYSTEMIC RISK

Contagion and self-fulfilling dynamics

Contagion and self-fulfilling feedback loops are propagation mechanisms at the heart of systemic financial crises....

Macro uncertainty as predictor of market volatility

Market volatility measures the size of variations of asset returns. Macroeconomic uncertainty measures the size...

Understanding international capital flows and shocks

Macro trading factors for FX must foremostly consider (gross) external investment positions. That is because...

Measures of market risk and uncertainty

In financial markets, risk refers to the probability distribution of future returns. Uncertainty is a...

Modern financial system risk for macro trading

Financial system risk is the main constraint and disruptor of macro trading strategies. There are...

SYSTEMATIC VALUE

Understanding the disposition effect

Investors have a tendency to sell assets that have earned them positive returns and are...

Macro uncertainty as predictor of market volatility

Market volatility measures the size of variations of asset returns. Macroeconomic uncertainty measures the size...

Classifying market states

Typically, we cannot predict a meaningful portion of daily or higher-frequency market returns. A more...

What traders should know about seasonal adjustment

The purpose of seasonal adjustment is to remove seasonal and calendar effects from economic time...

Inflation and precious metal prices

Theory and plausibility suggest that precious metal prices benefit from inflation and negative real interest...

POPULAR POSTS

The dangerous disregard for fat tails in quantitative finance

The statistical term ‘fat tails’ refers to probability distributions with relatively high probability of extreme outcomes. Fat tails also imply strong influence of extreme...

Understanding dollar cross-currency basis

Covered interest parity is an arbitrage condition that equalizes costs of direct USD funding and of synthetic USD funding through FX swaps. Deviations are...

VIX term structure as a trading signal

The VIX futures curve reflects expectations of future implied volatility of S&P500 index options. The slope of the curve is indicative of expected volatility...

Understanding the correlation of equity and bond returns

The correlation of equity and high grade sovereign bond returns is a powerful driver of portfolio construction and the term premia of interest rates....

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...

The importance of volatility of volatility

Options-implied volatility of U.S. equity prices is measured by the volatility index, VIX. Options-implied volatility of volatility is measured by the volatility-of-volatility index, VVIX....