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: Volatility

The low-risk effect: evidence and reason

The low-risk effect refers to the empirical finding that within an asset classes higher-beta securities fail to outperform lower-beta securities. As a result, “betting...

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,...

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...

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"Forecasting Foreign Exchange Rate: A Multivariate Comparative Analysis between Traditional Econometric, Contemporary Machine Learning & Deep Learning Techniques." https://t.co/AfVSxsKwPd https://t.co/rke8yzz6oK macro_srsv photo

"Hierarchical risk parity strategies use...hierarchical clustering... to build diversified portfolios...[which can include] a dissimilarity measure based on the lower tail dependence to explicitly incorporate the notion of tail risk management." https://t.co/mOZSqd5TbO https://t.co/O4Hsc79hgX macro_srsv photo

"Tidy Discounted Cash Flow Analysis in R for Company Valuation" emphasizes " tidy data principles [as] cornerstone of financial data modeling [through] the 'tidyverse', a collection of R packages, that work in harmony [and] are built for scalability." https://t.co/WBkxdKoOTB https://t.co/aIJGueTq8A macro_srsv photo

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SYSTEMIC RISK

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...

Bayesian Risk Forecasting

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

SYSTEMATIC VALUE

Detecting market price distortions with neural networks

Detecting price deviations from fundamental value is challenging because the fundamental value itself is uncertain....

Tracking investor expectations with ETF data

Retail investors' return expectations affect market momentum and risk premia. The rise of ETFs with...

Machine learning and macro trading strategies

Machine learning can improve macro trading strategies, mainly because it makes them more flexible and...

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...

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...

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...