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: Foreign exchange strategies

Joint predictability of FX and bond returns

When macroeconomic conditions change rational inattention and cognitive frictions plausibly prevent markets from adjusting expectations for futures interest rates immediately and fully. This is...

Dealer capital ratios and FX carry returns

When financial market intermediaries warehouse net risk positions of other market participants the marginal value of their capital should affect the expected and actual...

FX trading strategies based on output gaps

Macroeconomic theory suggests that currencies of countries in a strong cyclical position should appreciate against those in a weak position. One metric for cyclical...

Treasury basis and dollar overshooting

Safe dollar assets, such as Treasury securities, carry significant convenience yields. Their suitability for liquidity management and collateralization means that they provide value over...

Twitter Feed


"The impact of...OPEC and Russia...on the oil market [2017-2020] was quite limited, owing to significant deviations from the assigned quotas. On average, without the OPEC+ cuts, the price of oil would have been 6 percent (4 USD) lower." https://t.co/o9jX1bBxrX https://t.co/GRFP6dwpvI macro_srsv photo

R tidyverse: a powerful technology for macro trading research that supports efficient deployment of R’s vast universe of econometric models, nested data structures for data vintages and visually clean code for chains of statistical operations. https://t.co/8TkN1Vqid8 https://t.co/9NbDuiCVfV macro_srsv photo

"Primary contributor [to] systematic liquidity risk premia...is common variation [of] shocks to liquidity and market portfolio returns...due to [correlation of] liquidity and dividends...Premia are significant only for top quintile of illiquid stocks." https://t.co/5I2cvsE0BR https://t.co/Swp6jihQME macro_srsv photo

TAGS

SYSTEMIC RISK

Measures of market risk and uncertainty

In financial markets, risk refers to the probability distribution of future returns. Uncertainty is a...

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...

SYSTEMATIC VALUE

R tidyverse for macro trading research

The tidyverse is a collection of packages that facilitate data science with R. It is...

Nowcasting with MIDAS regressions

Nowcasting macro-financial indicators requires combining low-frequency and high-frequency time series. Mixed data sampling (MIDAS) regressions...

Market-implied macro shocks

Combinations of equity returns and yield-curve changes can be used to classify market-implied underlying macro...

Measures of market risk and uncertainty

In financial markets, risk refers to the probability distribution of future returns. Uncertainty is a...

Nowcasting for financial markets

Nowcasting is a modern approach to monitoring economic conditions in real-time. It makes financial market...

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...

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...

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 importance of volatility of volatility

Options-implied volatility of U.S. equity prices is measured by the volatility index, VIX. Options-implied volatility of volatility is measured by the volatility-of-volatility index, VVIX....