SBX - Structural Break Index®
Adding the "Third Dimension" to financial models
RELIABLE MEASURING OF REGIME CHANGES IN FINANCIAL MARKETS
Based on the Bayesian Changepoint Analysis (BCP), OpenMetrics Solutions LLC has introduced a completely new approach to measure regime changes in financial markets, the Structural Break Index - SBX.
The SBX adds 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 has not only a fully documented academic foundation but also been thoroughly tested in practice for several years in cooperation with renowned financial markets participants.
For all details, pls. read our whitepaper: “Introduction of the SBX Structural Break Index”
SBX® and SBX - Structural Break Index® are registered trademarks from OpenMetrics Solutions LLC at IPI (Swiss Federal Institute of Intellectual Property), Bern
POTENTIAL INDUSTRY IMPACT
Using the SBX as a basis for improving the calculation of risk signals, hedging/exposure management and other finance applications generates substantial benefits for the majority of financial industry players:
1. The potential industry impact for the SBX could be quite significant, for all data models, which depend on historical financial data.
2. By including the new paradigm of measuring structural breaks, the quality of many standard algorithms could be improved significantly.
3. Better algorithms and models across the industry could help to improve the quality of financial decisions and derived products overall.
SBX - MULTIPLE USE CASES
The SBX can add significant value to current and new risk management models in the financial industry.
The usage is very simple!
The SBX helps to improve the assessment process about upcoming market moves by re-calibrating existing quantitative models:
1. A low SBX value suggests to use a longer data history
2. A higher SBX implies to rely on more recent data
THE CASE FOR INDEX PROVIDERS
The SBX is a model case for index providers, as the centralized provision of complex indices maximizes the economies of scale for all market participants. This is especially valid for the SBX - Structural Break Index.
The SBX calculation is mathematically complex and computationally rather intensive, especially when higher calculation frequencies are required. Therefore, offering the calculated index for a range of products relieves the market participants from implementing the calculation process for themselves and reduces time-to-market as well as implementation and operating costs.
Market participants can not only benefit from the economies of scale of a centralized index calculation but also benefit from a reliable quality through standardization of models, data and processes.