All Risk Management articles
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White papersRisk (Modelling in Global Aggregate Portfolios) in a Time of COVID
John Beck, Director of Fixed Income contemplates how risk is measured in our portfolios.
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White papers
The VIX Index and Volatility-Based Global Indexes and Trading Instruments
Tools based on volatility indexes are widely used for hedging, diversification, risk management, and alpha generation, but investors should carefully study the pricing, risks, and other key aspects before deciding to use such products.
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White papers
Managing Risk Models in the Coronavirus Crisis
The spread of the COVID-19 virus has blindsided conventional risk models. By understanding what went wrong, investors can develop a more forward-looking approach to risk management that considers multiple scenarios for a highly uncertain market environment.
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White papers
How the S&P Managed Risk 2.0 Indices Dynamically Respond to Risk
Explore how a transparent, rules-based approach to risk management is designed to offer participation and downside protection with S&P DJI’s Tianyin Cheng.
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White papers
Blog | Playing defense - Quality bias prevails in exodus from risk
The dramatic outperformance of defensive factors – namely Quality, Profitability and Low Volatility – over their more economically vulnerable Value and Size (or smaller cap) factors was the dominant global theme in the first quarter. This further widened the already large 12-month performance gap between the two camps.
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White papers
Q1 2020 Performance Review for the S&P Risk Parity Indices
It comes as no surprise that the COVID-19 pandemic had a profound effect on global markets in the first quarter of 2020. The S&P 500® suffered steep declines, and U.S. Treasury yields fell (prices rose) as investors favored a flight to quality. In commodities, the S&P GSCI ended March down an extraordinary 29.4%, the largest monthly drop in performance in its almost 29-year history.
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White papers
The Trade-Off between Upside Participation and Downside Protection
Financial market history is rife with prolonged bull market periods and deep corrections. With no proven way to correctly time the market, market participants can stay fully invested and attempt to capture the potential upside, but they also have to endure and recover from the full depths of drawdowns. Hence, some market participants may choose a tradeoff to mitigate the most severe downside by forgoing a portion of the upside.
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White papers
Have Inverse Indices Been Able to Provide the Hedge You Expected?
Since March 9, 2020, we have seen equities and bonds fall together. As bonds fail to provide the diversification benefit in the short term, some investors may choose to use inverse exchange-traded funds as short-term trading tools for an explicit hedge.
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White papers
Wash Your Hands of Market Timing with Risk Control
The market highs of February 2020 already seem like a strange, distant past, in which people socialized, worked in offices, and were blissfully unappreciative of their abundant supply of toilet paper.
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White papers
Riding through Volatility with the S&P Balanced Global Bond and Equity Futures Index
The S&P Balanced Global Bond and Equity Futures Index (the S&P BEF Index) is designed to deliver consistent returns through various market cycles by exploiting the complementarity between equities and bonds during market crisis, and adjusting the allocation to component indices on a daily basis to achieve a stable risk level (what we call a dynamic volatility control mechanism).
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White papers
Multi-Asset Income Strategies in a Low Interest Rate Environment
One of the most significant characteristics of the post-financial crisis world has been the global persistence of low, or even negative, interest rates. The entire U.S. Treasury curve yielded below 1% for the first time in history on March 9, 2020, in the wake of the COVID-19 pandemic, before the long end reverted recently on fiscal stimulus reports.
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White papers
29 Days Later
On February 19th, the S&P 500® closed at an all-time high of 3386; last night, exactly one month later it closed at 2409, a 29% decline from the high. Let’s take a moment to reflect on what’s happened over the last month.
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White papers
The Importance of Asset Class Diversification: A Performance Analysis of the S&P MARC 5% Index
Recent selloffs in the equity markets and a significant rise in volatility signal an end to the 11-year bull market (Bye Bye Bull Market: Reaction to Coronavirus). While most broad market domestic equity indices have declined, the performance of the S&P MARC 5% Index (ER) has held up (1.84%). The answer to its resiliency lies in its index construction, which attempts to maximize diversification benefits.
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White papers
With VIX Above 80, Expect 5% Daily Swings in the S&P 500
Volatility – it is sometimes said – takes the elevator up but takes the stairs down. Like seismic activity, volatility can rise precipitously, but tends to decay more slowly; aftershocks and tremors continue to roil markets after any major repricing occurs. The practical consequence is that, once the markets become volatile, they tend to remain so for some time. For the short term at least, outsized daily moves will be the new normal.
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White papers
Showtime for Active Managers?
The rapid spread of coronavirus and oil price concerns have whipsawed U.S. equities since the S&P 500® reached its all-time high on Feb. 19, 2020. On March 16, 2020, the index plummeted by 12%, its worst decline since October 1987; as of the close of trading on March 18, 2020, losses for the S&P 500 amounted to 29%. Market commentators have argued that in this environment, active management has an advantage over index funds.
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White papers
The Best Offense Is Defense – Why VEQTOR Outperformed Last Week
Six minutes after trading began on the New York Stock Exchange on March 9, 2020, the S&P 500® plummeted 7% and market-wide circuit breakers kicked in for the first time since the stock market crash of Oct. 27, 1997.
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White papers
The VIX Futures Curve Is in Backwardation
Backwardation is incredibly uncommon in the VIX® futures curve. While the reason behind this term structure is not perfectly understood, the conclusion is clear: long and hold does not work for VIX futures, as the roll cost burns.
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White papers
The Darkest Hour
The bull market is over. After 11 years of impressive and relatively steady gains, last week the S&P 500® slid into bear market territory, marking the end of the glory of the 2010s and the start of a new regime. Volatility is back with a vengeance, and safe haven assets are now the belles of the ball. But what does this mean for markets? Should we panic yet? The short answer is: probably not.
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White papers
Crowding: The strategic, tactical, and liquidity perspectives
The growth in passive and alternative risk premia (ARP) investing has prompted questions about the possible impact of their perceived disruptive behavior— and whether the potential for future rewards could be crowded away. We advocate taking a more balanced view of crowding.
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White papers
Budgeting for Risk with Factors
How are passive factor strategies being used to actively manage risk? S&P DJI’s Travis Robinson sits
