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: Liquidity

How market liquidity causes price distortions

Liquidity is a critical force behind market price distortions (and related trading opportunities). First, the cost of trading in and out of a contract...

The price effects of order flow

Order flow means buyer- or seller-initiated transactions at electronic exchanges. Order flow consumes liquidity provided by market makers and drives a wedge between transacted...

Endogenous market risk: updated primer

Endogenous risk arises from the interaction of financial market participants, as opposed to traded assets’ fundamental value. It often manifests as feedback loops after...

A theory of hedge fund runs

Hedge funds’ capital structure is vulnerable to market shocks because most of them offer high liquidity to loss-sensitive investors. Moreover, hedge fund managers form...

Twitter Feed

Github repository "Algorithmic Trading in Python" contains Python code examples for "Algorithmic Trading Fundamentals", "Building A Quantitative Momentum Investing Strategy" and "Building A Quantitative Value Investing Strategy" in Jupyter notebooks. https://t.co/b2widtthFf https://t.co/j13T1YeEoe macro_srsv photo
"We develop early warning models for financial crisis...by applying machine learning techniques to macrofinancial data for 17 countries over 1870–2016...Throughout, the most important predictors are credit growth and the slope of the yield curve." https://t.co/3VKXPo7LkZ https://t.co/7wOlwXyPeE macro_srsv photo
"PyCaret...an open-source, low-code machine learning library in Python...recently released a Time Series Module which comes with...statistical testing, model training and selection (30+ algorithms), model analysis, [and] automated hyperparameter tuning." https://t.co/d4w5Jbu1cp https://t.co/rJT71HdqMj macro_srsv photo

TAGS

SYSTEMIC RISK

How to construct a bond volatility index and extract market information

Volatility indices, based upon the methodology of the Cboe volatility index (VIX), serve as measures...

Market dynamics: belief, risk, and ambiguity effects

To understand financial market dynamics, it is helpful to distinguish beliefs, attitudes towards risk, and...

Building a real-time market distress index

A new Fed paper explains how to construct a real-time distress index, using the case...

The financial stability interest rate

The financial stability interest rate is a threshold above which the real interest rate in...

Contagion and self-fulfilling dynamics

Contagion and self-fulfilling feedback loops are propagation mechanisms at the heart of systemic financial crises....

SYSTEMATIC VALUE

Fundamental value strategies

Value opportunities arise when market prices deviate from contracts’ present values of all associated entitlements...

Equity factor timing with macro trends

Plausibility and empirical evidence suggest that the prices of equity factor portfolios are anchored by...

Measuring the value-added of algorithmic trading strategies

Standard performance statistics are insufficient and potentially misleading for evaluating algorithmic trading strategies. Metrics based...

The emotion beta of stocks

Stock markets cater to both the financial and emotional needs of investors. In particular, integral...

Risk premia in energy futures markets

Energy futures markets allow transferring risk from producers or consumers to financial investors. According to...

POPULAR POSTS

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 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 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....

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...