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

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....

Multiple risk-free interest rates

Financial markets produce more than one risk-free interest rate. This is because there are several separate market segments where structured trades replicate such a...

Twitter Feed


Paper proposes "a growth adjusted price-earnings ratio...as measure of value and predictor of future stock returns...Market-wide analysis indicates the superiority of the growth-adjusted P/E to conventional P/E in forecasting returns." https://t.co/pTZtVb1q4Q https://t.co/UUHQXIxvT4 macro_srsv photo

"Eigenvectors of the [asset price] correlation matrix can be used to identify the market mode, sectors and style factors...Underlying economic and financial mechanisms determining the correlation structure of securities depend...on time scales." https://t.co/DzRvUqyirE https://t.co/zUU8ZBml5Z macro_srsv photo

Paper on "crowded trades" finds "consistent and robust positive relation between market clustering [degree of trading overlap among investors] and the kurtosis [fat tails] the skewness of return distribution." https://t.co/xGOQc2AwrS https://t.co/oXI3DEim3d macro_srsv photo

TAGS

SYSTEMIC RISK

Risk management shocks and price distortions

Risk management relies on statistical metrics that converge on common standards. These metrics can change...

Unproductive debt

Credit and related interest income have historically been viewed as service and related payment for...

How central banks can take nominal rates deeply negative

The popular view that nominal interest rates have a natural zero lower bound has become...

Bayesian Risk Forecasting

Portfolio risk forecasting is subject to great parameter uncertainty, particularly for longer forward horizons. This...

The duration extraction effect

Under non-conventional monetary policy central banks influence financial markets through the “portfolio rebalancing channel”. The...

SYSTEMATIC VALUE

The q-factor model for equity returns

Investment-based capital asset pricing looks at equity returns from the angle of issuers, rather than...

Risk management shocks and price distortions

Risk management relies on statistical metrics that converge on common standards. These metrics can change...

The predictive superiority of ensemble methods for CDS spreads

Through 'R' and 'Python' one can apply a wide range of methods for predicting financial...

How market liquidity causes price distortions

Liquidity is a critical force behind market price distortions (and related trading opportunities). First, the...

The price effects of order flow

Order flow means buyer- or seller-initiated transactions at electronic exchanges. Order flow consumes liquidity provided...

POPULAR POSTS

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 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...

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...

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....

Basic theory of momentum strategies

Systematic momentum trading is a major alternative risk premium strategy across asset classes. Time series momentum motivates trend following; cross section momentum gives rise...

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...