Research preview

A magnitude‑6.0 earthquake struck Panama late on Friday, exposing damage to infrastructure and prompting a surge of news flow. For quantitative traders, such abrupt, exogenous events are a reminder that models must account for sudden jumps, liquidity squeezes, and the limits of arbitrage. This article uses the Panama quake as a case study to illustrate how to stress‑test portfolios, evaluate bid‑ask spreads, and incorporate event‑driven risk factors within a rigorous investment framework. Event‑Driven Risk and the Limits of Arbitrage When a natural disaster hits, market participants react to new information, but the reaction is rarely instantaneous or uniform....