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: Risk Management

Bayesian Risk Forecasting

Portfolio risk forecasting is subject to great parameter uncertainty, particularly for longer forward horizons. This simply reflects that large drawdowns are observed only rarely,...

Signaling systemic risk

Systemic financial crises arise when vulnerable financial systems meet adverse shocks. A systemic risk indicator tracks the vulnerability rather than the shocks (which are...

How to estimate risk in extreme market situations

Estimating portfolio risk in extreme situations means answering two questions: First, has the market entered an extreme state? Second, how are returns likely to...

Drawdown control

Containment of drawdowns and optimization of performance ratios for multi-asset portfolios is critical for trading strategies. Alas, short data series or structural changes often...

Twitter Feed


Paper proposes method for "detecting relationship changes in financial markets [with] network visualization to support fund managers dealing with multi-assets... visualizing when and what changes are occurring and which assets play a central role." https://t.co/bVU4us36cG https://t.co/OvSNPA28gg macro_srsv photo

Joint predictability of FX and bond return: upside shocks to the rates outlook in a currency area herald positive FX and negative bond returns. This proposition has been backed by empirical evidence over the past 30 years. https://t.co/YhbOx63u7J https://t.co/ZIPxyDMsON macro_srsv photo

"We show that a risk factor linked to aggregate equity issuance conditions...subsumes investment factors in leading linear factor models...[and] improves the overall pricing performance of linear factor models." https://t.co/oAN8JJfqdA https://t.co/X8Ze8rtDRz macro_srsv photo

TAGS

SYSTEMIC RISK

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...

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...

SYSTEMATIC VALUE

Joint predictability of FX and bond returns

When macroeconomic conditions change rational inattention and cognitive frictions plausibly prevent markets from adjusting expectations...

The predictive power score

The predictive power score is a summary metric for predictive relations between data series. Like...

Equilibrium theory of Treasury yields

An equilibrium model for U.S. Treasury yields explains how macroeconomic trends and related expectations for...

Factor timing

Factors beyond aggregate market risk are sources of alternative risk premia. Factor timing addresses the...

Macro trading and macroeconomic trend indicators

Macroeconomic trends are powerful asset return factors because they affect risk aversion and risk-neutral valuations...

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...

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 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...

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...