Abstract: Citation: Diversification is the cornerstone of risk-adjusted portfolio construction. Yet, despite being a well-established principle in finance, diversification has been overlooked in pairs trading strategies, which often focus solely on selecting the most cointegrated pairs in isolation from the broader market structure and without accounting for their combined behavior within a portfolio. Here, weContinue reading ““Too Connected to Fail”: Network Portfolio Construction”
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Credit Market Stress and Cascading Failures
Market chatter seems to be rising reflecting growing fears credit market stress is ascending as Treasury yields fall and other economic warning signs are lighting up. Manufacturing data and labor markets are retreating and the Fed is shutting down its QT policy ahead of possible rate cuts. A bank liquidity crisis occurs when a bankContinue reading “Credit Market Stress and Cascading Failures”
Econophysics2020 