The Macro-Micro Model, Trends vs. Noise, and SSA - I

12 Pages Posted: 13 Jul 2016 Last revised: 22 Jul 2016

See all articles by Jan Dash

Jan Dash

Fordham University; Bloomberg LP

Xipei Yang

Bloomberg L.P.

Mario Bondioli

Bloomberg L.P.

Date Written: July 11, 2016

Abstract

The Macro Micro (MM) model contains different time scales and deals with risk as it occurs in the real world, especially trend risk. A new methodology - Singular Spectrum Analysis (SSA) – is introduced to identify historical trends, trend volatilities, and noise-reduced trend-trend correlations. Application is for a long-term PFE risk simulation, including realistic quasi-random Macro trends. Two Macro versions of the MM model are presented – a statistical trend model and a historic “time-slice” trend model.

Keywords: Macro, Micro, MM, time scales, real world, trend risk, Singular Spectrum Analysis, SSA, correlations, PFE, risk simulation, quasi-random, statistical trend model, historic “time-slice” trend

JEL Classification: C14, C63, E44, F65, G1

Suggested Citation

Dash, Jan and Yang, Xipei and Bondioli, Mario, The Macro-Micro Model, Trends vs. Noise, and SSA - I (July 11, 2016). Available at SSRN: https://ssrn.com/abstract=2808176 or http://dx.doi.org/10.2139/ssrn.2808176

Jan Dash (Contact Author)

Fordham University ( email )

113 W. 60th St
New York, NY 10023
United States

Bloomberg LP ( email )

731 Lexington Ave
New York, NY 10022
United States

Xipei Yang

Bloomberg L.P. ( email )

731 Lexington Avenue
New York, NY 10022
United States

Mario Bondioli

Bloomberg L.P. ( email )

731 Lexington Avenue
New York, NY 10022
United States

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