Regime-aware risk decomposition for coupled portfolios
K. Omori · Markets Group
Biuron Technical Notes
Traditional factor models assume a fixed structure of risk. Markets do not oblige. We learn a set of regime-conditional factors whose loadings shift with the state of the market, and show that the resulting decomposition tracks realised risk through transitions that break static models.
The approach integrates directly with the cross-asset foundation model, using its latent state as the conditioning variable for the decomposition.
This is a plain-language summary. The full manuscript and supplementary material are available on request.