BISAM Insights Blog

Ivan Mitov, Head of Quantitative Research, BISAM

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Eurozone Macro Cap Equities – Prices and Volatilities on the eve of French Elections

Posted by Ivan Mitov, Head of Quantitative Research, BISAM on Apr 21, 2017 8:35:00 AM

The upcoming first round of the French presidential elections is on the radar of the global investment community. Although the new president of France will not be elected on the first round, its outcome seems critical for the future path of France and the EU.

A victory by far-right leader Marine Le Pen or far-left leader Jean-Luc Mélenchon is seen by many investors as potentially fatal for the Euro and even the EU itself. This is a political risk and the outcome of the election is quite difficult to predict by means of historical events or the standard tools for measuring and forecasting market risk (as mentioned in https://insight.factset.com/an-approach-to-government-policy-risk-management).

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Topics: Daily Risk Statistics, Risk Management

Risk Analysis of the U.S. Dollar Index (DXY)

Posted by Ivan Mitov, Head of Quantitative Research, BISAM on Feb 22, 2017 12:38:43 PM

 

During the last couple of weeks, the U.S. Dollar has lost some power with respect to the currencies of the United States’ major trading partners, prompting myself and my colleagues - Velislav Bodurov and Bono Nonchev - to question how strong and characteristic the movements are, as well as what methodology should be used to model them. Following is our analysis, which looks at the U.S. Dollar Index (DXY) using BISAM's patented Cognity® real-world risk modeling approach. 

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Topics: Risk Management

"The Most Significant Change in FX Rate Correlations Since the Beginning of the Century" - Observations Pre/Post Brexit

Posted by Ivan Mitov, Head of Quantitative Research, BISAM on Aug 3, 2016 10:39:04 AM

 

After the EU referendum vote last month, the British Pound suffered significant depreciation vs. the US dollar. The GBP/USD rate slumped by almost 8% in just a single day (June 24, 2016), which is an all-time record for this currency pair. On the other hand, the Japanese Yen appreciated vs. the US Dollar and the USD/JPY rate decreased by 3.4%. This is a significant joint extreme for these two currency pairs. 

So what does that mean for the correlation between the two rates? And what was the Brexit effect on the major FX Rates correlations? Today's post leverages BISAM's Cognity® risk solution to look across market risk analytics in the above-referenced currency pairs, and highlights what appears to be the most significant correlation change since the beginning of the century.
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Topics: Risk Management

Pre- and Post-Brexit Observations  of Fat-Tail vs. Normal VaR Spreads Across the MSCI World Index™

Posted by Ivan Mitov, Head of Quantitative Research, BISAM on Jul 21, 2016 2:30:00 AM

 

As we've previously shown, one approach for assessing levels of market turbulence is to look at the difference in the tail (possibility for extreme events) as measured by the Normal VaR (or ETL) vs. the Cognity Fat-tailed VaR (or ETL). In the case of “normal” markets (i.e. no excess probability of extreme events), the two approaches would coincide. Widening of that spread, however, indicates increasing market turbulence, and associated with that, increasing probability of extreme events.

As you’ll see from our below observations of the Normal vs. Fat-tailed VaR spreads across the MSCI World IndexTM there were no surprises as to which markets saw the most turbulence in the weeks just before and after the EU referendum vote. However, it is clear from observing the Fat-Tail vs. Normal VaR spreads, that the Fat-Tail VaR indicated a more accurate measure of risk in those markets than what the Normal VaR was indicating. So risk managers who continue to observe the spread (vs. looking only at normal VaR) can stay on top of future signs of turbulence as the Brexit “unknowns” continue to unfold.

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Topics: Daily Risk Statistics, Risk Management

Fat-tailed Sigma-tized view of the Post-Brexit Markets

Posted by Ivan Mitov, Head of Quantitative Research, BISAM on Jun 30, 2016 10:05:11 AM

A recent article by Bloomberg “Brexit Spurred a Bunch Of VaR-y Rare Market Gyrations spurred our own risk analysts  to run a related study using BISAM’s Cognity fat-tailed models.

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Topics: Risk Management