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....

Twitter Feed


"Pricing of assets relies on forecasts of cash flows...We use machine learning to construct an...unbiased benchmark for firms' earnings expectations...useful as input to asset pricing...Analyst expectations are on average biased upwards." https://t.co/33exkWjsMj https://t.co/rh2d3crwKl macro_srsv photo

"Thermodynamics of markets:...There is a deep analogy between the parameters of thermodynamic and economic systems (markets); in particular, each thermodynamic parameter can be associated with a certain economic parameter or indicator." https://t.co/nSVMI4W3JB https://t.co/gR6lPr7u3O macro_srsv photo

"Machine learning models uncover economically sensible relationships between historical financial information and future earnings...The new information...is significantly associated with future stock returns." https://t.co/hu1Vf2YBlZ https://t.co/prPufHUvfj macro_srsv photo

TAGS

SYSTEMIC RISK

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...

Public finance risk

Fiscal expansion was the logical response to the 2020 health and economic crisis. Alas, public...

Systemic risk under non-conventional monetary policy

Central bank operations in the form of quantitative easing, qualitative easing, forward guidance and collateral...

SYSTEMATIC VALUE

Prospect theory value as investment factor

Prospect theory value as investment factor Prospect theory value is a valid investment factor, particularly in...

Understanding international capital flows and shocks

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

R tidyverse for macro trading research

The tidyverse is a collection of packages that facilitate data science with R. It is...

Nowcasting with MIDAS regressions

Nowcasting macro-financial indicators requires combining low-frequency and high-frequency time series. Mixed data sampling (MIDAS) regressions...

Market-implied macro shocks

Combinations of equity returns and yield-curve changes can be used to classify market-implied underlying macro...

POPULAR POSTS

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...

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...

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....