Macrosynergy Research

Macrosynergy research (formerly Systemic Risk and Systematic Value) is a free educational site dedicated to responsible macro trading strategies. These 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: Bond yields

Analyzing global fixed income markets with tensors

Roughly speaking, a tensor is an array (generalization of a matrix) of numbers that transform according to certain rules when the array’s coordinates change....

The duration extraction effect

Under non-conventional monetary policy central banks influence financial markets through the “portfolio rebalancing channel”. The purchase of assets changes the structure of prices. A...

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....

How convenience yields have compressed real interest rates

Real interest rates on ‘safe’ assets such as high-quality government bonds had been stationary around 2% for more than a century until the 1980s....

Twitter Feed

"Risk premia are defined as difference between implied volatility, skewness, and kurtosis and their realized moments. [We show] spillover effects of equity for commodities...of returns for risk premia...and of skewness premia for the returns." https://t.co/YYy6Y6vDAp 🇺🇦 https://t.co/GJfR9oBDWg macro_srsv photo
"Do You Really Know Your P&L? The Importance of Impact-Adjusting the P&L": "We...show that the difference between accounting and fundamental P&L, known as the trading footprint, can be significant in common trading scenarios." https://t.co/P7ZqMaQzlN 🇺🇦 https://t.co/WZD2GXgFwx macro_srsv photo
Fiscal policy criteria for fixed-income allocation:
Evidence from 20 countries over 20 years shows that indicators of fiscal stances have been timely, theoretically plausible, and profitable criteria for fixed-income allocations across currency areas.
https://t.co/Bq5HfweDua 🇺🇦 https://t.co/t8OtpIRumx
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TAGS

SYSTEMIC RISK

Crashes in safe asset markets

A new theoretical paper illustrates the logic behind runs and crashes in modern safe asset...

Copulas and trading strategies

Reliance on linear correlation coefficients and joint normal distribution of returns in multi-asset trading strategies...

How to manage systemic risk in asset management

Systemic crises are rare but critical for long-term performance records. When the financial system fails,...

Classifying market regimes

Market regimes are clusters of persistent market conditions. They affect the relevance of investment factors...

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...

SYSTEMATIC VALUE

Fiscal policy criteria for fixed-income allocation

The fiscal stance of governments can be a powerful force in local fixed-income markets. On...

Detecting trends and mean reversion with the Hurst exponent

The Hurst exponent is a statistical measure of long-term memory of time series. The existence...

Modified and balanced FX carry

There are two simple ways to enhance FX carry strategies with economic information. The first...

FX trades after volatility shocks

Currency areas with negative external balances are – all other things equal – more vulnerable...

Identifying the drivers of the commodity market

Commodity futures returns are correlated across many different raw materials and products. Research has identified...

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...

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....

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...