Research preview

The sudden announcement that a controversial figure may become White House Press Secretary sent shockwaves through equity markets, options desks, and high‑frequency traders. This article shows how such political spikes can be incorporated into a quantitative risk framework, using concepts from loss distribution modelling, extreme‑value theory and back‑testing. 1. From News Shock to Return Shock When a headline breaks, market participants react instantly, causing a burst of volatility and a short‑term drift in prices. In a quantitative model the news event is treated as a jump component added to the continuous diffusion of returns. The jump size can be calibrated from historical reactions to similar political surprises....