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: Interest rates term structure

Understanding negative inflation risk premia

Inflation risk premia in the U.S. and the euro area have disappeared or even turned negative since the great financial crisis, according to various...

Inflation: risk without premium

Historically, securities that lose value as inflation increases have paid a sizable risk premium. However, there is evidence that inflation risk premia have vanished...

Japan’s yield curve control: the basics

The Bank of Japan has once again broken new grounds in monetary policy, now targeting not just the short-term policy rate but – within limits...

SYSTEMIC RISK

Critical transitions in financial markets

Critical transitions in financial markets are shifts in prices and operational structure to a new...

China’s internal debt overload: a refresher

According to the latest IMF China report credit to non-financial institutions has soared to over...

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,...

SYSTEMATIC VALUE

How to use financial conditions indices

There are two ways to use financial conditions indicators for macro trading. First, the tightening...

The latent factors behind commodity price indices

A 35-year empirical study suggests that about one third of the monthly changes in a...

Critical transitions in financial markets

Critical transitions in financial markets are shifts in prices and operational structure to a new...

Hedging FX trades against unwanted risk

When FX forward positions express views on country-specific developments one can shape the trade to...

FX forward returns: basic empirical lessons

FX forward returns for 29 floating and convertible currencies since 1999 provide important empirical lessons....

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 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 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 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...