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Risk Management Background

Risk Analytics

Risk
Management

Systematic crisis detection and defensive positioning strategies for capital preservation and downside protection.

Our risk management models help you identify market dangers before they impact your portfolio. Built on defensive investment strategies and crisis detection frameworks, these tools focus on protecting capital during volatile periods and market downturns. Each model provides systematic signals for defensive positioning and helps you navigate uncertain market conditions with confidence.

Professional

Professional Models

Institutional-grade risk assessment with advanced features and comprehensive documentation.

ARAI

Advanced Risk Appetite Index (ARAI)

PRO

CHF 213.50/year

Defensive investment strategy focused on capital preservation and risk reduction. 24% lower volatility than S&P 500 with systematic crisis protection.

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CCI

Credit Cycle Index (CCI)

PRO

CHF 178.50/year

Systematic credit market analysis detecting cycle phases through spread dynamics, yield curves, and institutional flows for defensive positioning.

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VTSI

Volatility Term Structure Index (VTSI)

PRO

CHF 158.50/year

Analyzes VIX term structure patterns to detect market stress and regime changes. Systematic crisis detection through volatility dynamics.

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Open Source

Free Models

Open-source risk management tools available to all investors.

Bear Market Probability Model

Free

Quantitative model analyzing systemic market risk through 13 distinct factors across macroeconomic, technical, sentiment, and breadth categories.

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Credit Market Pressure Index

Free

Analyzes credit market stress through high-yield spreads, Treasury curves, and institutional positioning for systemic financial risk assessment.

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Drawdown Analysis

Free

Risk assessment analyzing drawdown distribution patterns and risk-adjusted performance metrics for portfolio evaluation.

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Dynamic Equity Allocation

Free

Strategic allocation model dynamically adjusting equity exposure based on market conditions and risk signals.

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Kelly Position Size Calculator

Free

Mathematical position sizing tool using Kelly Criterion for optimal capital allocation and risk management.

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Volatility Risk Premium

Free

Analyzes the difference between implied and realized volatility to identify when options are mispriced relative to actual market movements.

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Credit Spread Regime

Free

Identifies credit market regimes by analyzing spreads to detect risk-on/risk-off environments and market turning points.

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Absorption Ratio

Free

Measures systemic risk by calculating variance concentration, indicating market fragility and interconnectedness.

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Market Entropy Index

Free

Quantifies market disorder through information-theoretic entropy measures. Detects regime transitions between orderly trending and chaotic mean-reverting states.

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Carry Cost Monitor

Free

Estimates implicit financing costs when your account currency differs from the instrument currency. Compares carry spreads across 9 major currencies with broker markup tiers.

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Research & Methodology

The quantitative foundations behind our risk management tools.

The asymmetry of losses

A 50% drawdown requires a 100% gain to recover. During the 2008 financial crisis, the S&P 500 lost roughly 57% from peak to trough. An investor who avoided even half of that decline would have been years ahead in terminal wealth. This asymmetry is the central reason risk management deserves at least as much analytical effort as return generation. Systematic approaches remove the timing problem by defining rules in advance, evaluated against historical data, and executed without emotional interference.

Multi-factor crisis detection

No single measure reliably predicts all market downturns. The 2000 dot-com collapse was driven by equity valuations. The 2008 crisis originated in credit markets. The 2020 crash was an exogenous shock with no financial precursor. Effective systems combine signals from multiple domains: macroeconomic data, credit conditions, volatility dynamics, market breadth, and sentiment. Requiring confirmation across two or three independent categories substantially reduces false positives while maintaining reasonable detection lead times.

Proactive versus reactive approaches

Most retail investors practice reactive risk management: they reduce exposure after observing losses. By the time a drawdown is large enough to trigger action, significant damage is done. Proactive risk management monitors leading signals and adjusts positioning before equity markets fully price in deteriorating conditions. A system that reduces equity exposure when credit spreads widen abnormally is not forecasting a crash; it is acknowledging that the distribution of future returns has shifted unfavorably.

Credit markets as leading signals

Credit markets have historically provided earlier warning signals than equity markets. High-yield bond spreads began widening in mid-2007, roughly six months before the S&P 500 peaked. Credit investors are structurally more focused on downside risk: a bondholder's upside is capped at par plus coupon, so deteriorating fundamentals immediately affect pricing. Monitoring yield curves, high-yield spreads, and corporate funding stress provides actionable information before conditions manifest as equity losses.

Volatility regimes and term structure

Equity volatility clusters into regimes. Low-volatility environments persist for extended periods, punctuated by sharp transitions into high-volatility states. The VIX term structure contains information about market expectations of these transitions. Under normal conditions, the curve slopes upward (contango). When it inverts into backwardation, near-term fear exceeds longer-term expectations, historically associated with acute market stress. Tracking this curve provides a real-time gauge of how options markets are pricing risk.

Position sizing and the Kelly Criterion

Even with accurate signals, poor position sizing can undermine a sound strategy. The Kelly Criterion provides a mathematically optimal framework for determining allocation given known edge and odds. Full Kelly sizing maximizes long-run geometric growth but produces uncomfortably large drawdowns. Most practitioners use fractional Kelly, typically one-half or one-quarter of the theoretical optimum, trading a modest amount of growth for substantially lower volatility and smaller peak-to-trough declines.

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25+ free quantitative models on TradingView. 7 portfolio strategies with daily-updated dashboards.

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