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: Herding in financial markets

Mutual fund flows and fire sale risk

A new empirical paper looks at the drivers of U.S. mutual funds flows across asset classes. An important finding is that changes of monetary...

The 1×1 of trend-following

Trend-following is the dominant alternative investment strategy. Its historical return profile has been attractive on its own and for diversification purposes. It is suitable for...

How poor liquidity creates rational price distortions

When OTC markets become illiquid and dealers fail to buffer flows, institutional investors effectively face each other directly in the market. They can observe...

SYSTEMIC RISK

The 1×1 of risk perception measures

There are two reasons why macro traders watch risk perceptions. First, sudden spikes often trigger...

The consequences of increased financial collateralization

There has been a strong upward trend in collateralization since the great financial crisis. Suitable...

How bank regulatory reform has changed macro trading

The great regulatory reform in global banking has altered the backdrop for macro trading. First,...

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...

SYSTEMATIC VALUE

The downside variance risk premium

The variance risk premium of an asset is the difference between options-implied and actual expected...

The 1×1 of risk perception measures

There are two reasons why macro traders watch risk perceptions. First, sudden spikes often trigger...

The predictability of relative asset returns

Empirical research suggests that it is easier to predict relative returns within an asset class...

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...

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 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 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...

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 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...