Modelling the Bottom of the Covid-19 Financial Crisis

The global pandemic of current scope is something that was experienced by only a few living people. We have some historical accounts of how it unfolded in the past, but otherwise, it is uncharted territory. It is a true Black Swan event — event that I believe was in nobody’s lineup of stress testing scenarios. But we can still try to get some understanding of the scope of the current situation.

The actual global crisis is a mix of 2 crisis. The first one is the health-care / pandemic crisis, during which millions of people will be infected, and unfortunately, a lot of people will die. The second crisis is the economic crisis/recession, which will follow simultaneously with (or soon after) the first one (due to the decrease in worldwide supply and demand).

The second crisis cannot end before the first one is solved. We cannot exactly say when the market bottom will occur, but at least we can try to model the minimum time needed for things to get under control during the pandemic.

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