Detecting Changes in Asset Co-Movement Using the Autoencoder Reconstruction Ratio

23 Jan 2020Bryan LimStefan ZohrenStephen Roberts

Detecting changes in asset co-movements is of much importance to financial practitioners, with numerous risk management benefits arising from the timely detection of breakdowns in historical correlations. In this article, we propose a real-time indicator to detect temporary increases in asset co-movements, the Autoencoder Reconstruction Ratio, which measures how well a basket of asset returns can be modelled using a lower-dimensional set of latent variables... (read more)

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