Hamburger
Request a demo
Close
Close
Juskteez Vu Tirxot28Znc Unsplash
20.07.2022
How to measure
Italian political risk
Marrying bottom up & top down analysis is hard enough. How are portfolio managers supposed to handicap political risk?

Instead of relying on the opinion of geopolitical strategists, the Qi framework uses financial securities to capture the markets’ current perceptions of the risk around certain political scenarios.

Asset swap spreads for peripheral EuroZone sovereigns like Italy, Spain & Greece can be used to measure the degree of stress markets are pricing in for highly indebted southern European economies.

Qi’s algorithm de-trends & vol adjusts each spread, & then runs Principal Component Regression to capture the independent sensitivity of any security to this factor.

In the chart below we look at European equity sectors & overlay sensitivity to peripheral spreads with aggregate macro valuations.

Sectors to the right of the vertical zero bound want Italian spreads to remain well behaved. The further to the right, the greater the sensitivity; i.e. the more vulnerable they are if BTP spreads blow wider.

Red dots above the horizontal zero bound are currently rich relative to overall macro fair value.
Europe Equity Sectors Btps
Today, Mario Draghi addresses the Senate; tomorrow the ECB meet. A new Draghi coalition government plus details of a credible anti—fragmentation tool would help assuage market fears about a blow-out in BTP spreads.

If you hold that view, European Chemicals look an interesting prospect. If your fear further political instability ahead, choose between EU Technology (highly sensitive) or Media (rich valuation).

Qi's Optimise Trade Selection function enables you to run this search across a range of assets. Instead of sectors, screen Euro Stoxx 600 single stocks for their sensitivity to BTP spreads. API users can go a step further & screen their own portfolio for shifts in the Italian political landscape.

#nextgenerationstresstests
Close
Thank you for request
A team member will contact you soon shortly.
Request a demo
Explore Quant Insight's unique data, analysis and solutions to understand how you and your team can easily integrate our information into your workflow.
Book a 15 minute intro call here



Or, simply complete the short enquiry form on this page, and one of our team will be in touch via email.
Name: 
Company email: 
Tel number (optional): 
Company: 
My geographical location is:

My asset class focus is:
Submit
Close
Microsoftteams Image 3
Quant Insight’s Macro Analytics
on Goldman Sachs Marquee
Goldman Sachs is embedding Qi’s data-science-driven
macro factor risk data into Marquee to offer risk
management capabilities that help provide clarity to your
investment analysis as you navigate your portfolio exposures,
asset by asset, through dynamic market conditions.
Goldman Sachs is embedding Qi’s data-science-driven macro factor risk data into Marquee to offer risk management capabilities that help provide clarity to your investment analysis as you navigate your portfolio exposures, asset by asset, through dynamic market conditions.