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 uses "set of Machine Learning techniques...Gradient Descent Boosting, Random Forest, Support Vector Machine and Artificial Neural Network...Algorithms are stacked to predict S&P volatility...leading to a more accurate assessment of the market risk." https://t.co/YRx711fUkn https://t.co/GRYFMXbRkr macro_srsv photo

"Nowcasting [uses] dynamic factor models, which relate a set of indicators to a single underlying factor...We assess performance of a leading small-data nowcast...designed to track business conditions at high frequency...released in real time since 2008." https://t.co/tNJQ6hv6bu https://t.co/YQX8RZC8gT macro_srsv photo

Trend filtering of market prices with Python: "Smooth time series by filtering out ‘noise’...[with] a trade-off between two objectives...[1] to minimise the residual between actual and smooth series...[2] to maximise the smoothness of the filtered series." https://t.co/P6pA1ZKreS https://t.co/GL62bXhGTa macro_srsv photo

TAGS

SYSTEMIC RISK

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...

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...

SYSTEMATIC VALUE

External imbalances and FX returns

Hedge ratios of international investment positions have increased over past decades, spurred by regulation and...

Predicting volatility with heterogeneous autoregressive models

Heterogeneous autoregressive models of realized volatility have become a popular standard in financial market research....

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...

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....

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...

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...

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...