Axioma: How to model a trade war

“How would you model a trade war?” It’s a question that’s being asked a lot lately, thanks to actions by the Trump administration. In this article, we examine the impact of a potential trade war on a global multi-asset class model portfolio—first from an ex-ante risk point of view and then by applying a stress test.

Let’s start with the good news: the scenario is relatively straightforward and easy to model. As the trade war has already started, we know how markets are likely to react to a

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