Top Traders Unplugged SI370: Sharpe Ratios, Tail Risks, and the Cost of Comfort ft. Nigol Koulajian & Alan Dunne
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Oct 18, 2025 Nigol Koulajian, founder of AlphaQuest and expert in systematic strategies, joins to delve into the intricate dance between market perception and reality. He highlights how political influence has distorted traditional risk signals and emphasizes hidden fragilities behind high Sharpe ratios. The conversation explores the danger of complacency in what seems like stability, the impact of behavior on market dynamics, and the threats posed by skew and convexity. Koulajian also discusses how to turn market fragility into opportunity amidst shifting conditions.
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Markets Become Politically Supported Growth Engine
- Political and central-bank intervention has transformed the U.S. stock market from a risky tail into a dominant driver of the economy.
- That shift makes equity returns feel like fixed income and masks true systemic fragility.
Sharpe Ratios Can Mask Tail Fragility
- High Sharpe ratios across large platforms often hide concentrated tail-risk exposures rather than pure skill.
- Leverage plus tight hedging creates fragile, correlated risks that can unwind violently when perception shifts.
AI's Hidden Link To Energy-Driven Inflation
- AI-driven market valuations amplify future real energy demand, creating asymmetric inflation risk in commodities and energy sectors.
- If AI ambitions require vast physical infrastructure, energy scarcity could force major valuation repricing.