Introduction of the SBX - Structural Break Index®

The third dimension for measuring financial markets

OpenMetrics Solutions LLC5 has introduced a completely new approach to measure regime changes in financial markets, the SBX - Structural Break Index, which has not only a solid and fully documented academic foundation but also has been thoroughly tested in practice for several years in cooperation with renowned financial markets participants.

The SBX adds basically a third dimension to trend and variance and allows not only to calculate market stability signals but also - and that makes it valuable for a wider range of use cases - to improve already implemented financial standard models. The SBX provides the information on how to weight data history.

So if the SBX is high, the more recent data history should be considered, in contrast to a low SBX, which implies that a longer data history should be taken as input.

We are convinced, that using a mathematically sound methodology for detecting regime changes is key for any successful risk management i.e. hedging. In this paper we will describe the methodology behind the SBX and present some sample applications.

Based on our experience the SBX is one of the most reliable concepts for the identification of regime changes in financial markets for the time being.

An additional advantage is that it only uses the principal time-series as input and shows very robust results over various markets and long market periods without any modification.