Brent and Alf discuss the n-th injection of the Orange Variable in markets: Trump decided to escalate again with Iran, and even suggested the ceasefire might be over altogether. The duo discusses how to approach these injections of uncertainty, and what are the best trading and risk management frameworks to deploy here.

The Orange Variable

The Macro Trading Floor

The Macro Trading Floor. With me, Alfonso Peccatiello, founder of the Macro Compass and former head of investments at a large European bank. Brent Donnelly, president of Spectra Markets. I've been a portfolio manager, day trader, and market maker at the biggest commercial and investment banks in the United States. I'm also the author of Alpha Trader and the Art of Currency Trading. If you want to know what's going on in markets and where they're going, you've found the right podcast.

Hi everybody and welcome back to the Macro Trading Floor. Brent and I are back again and before going live, we were talking about the orange variable. You know, in finance and macro there are many of these models where you try to model out prices or risk premia. There is the famous CAPM model and there are others. And some of them tend to have an error term, stuff you can't explain really, statistically.

Well, managing money for the last two years has been sometimes a big error term that I like to call the orange variable. Brent, can you enlighten us on what the orange variable is? I mean, Alf is a funny guy just in general, but I think this is some of his funniest work is factoring in the orange variable, which is essentially like the random policy shocks that we get every two months or whatever. And then the ripple effect of those policy shocks.

And the lags of the policy shocks because the data is lagged. So every time we get one of these policy shocks, you need to factor in the orange variable, which is that the policy shock could be doubled down or removed at any time.

The Orange Variable

Read the full transcript

The candid version is on a podcast,
not the earnings call.

The Orange Variable

Read the full transcript

The candid version is on a podcast, not the earnings call.

The candid version is on a podcast,
not the earnings call.