Arkus Focus February 2016
(Un)happy New Year
by Niall O'Connor
- Volatility trends were again sharply upwards during January, with the exception of government bonds. Volatilities ended mostly High (but low for government bonds) relative to their 12-month averages.
- Realised volatility (of Eurostoxx equities over 30 days) rose from 25.2% to 27.1% (High).
- Equity market price moves were large and downwards; volatility trends were upwards. Sector volatilities ranged from 16-26%, although Energy rose to 40%. All major sectors had High volatilities relative to the last 12 months.
- Sovereign bond prices resumed their upward moves during the month. Bond volatilities were generally down ending at 3-6% (and 0.8% in Japan). Germany, US and Japan were all low.
- FX moves were large, with the euro again strengthening by 1-3% vs other major currencies. Volatility trends were mostly downwards: e.g. €/$ down to 8.0%. Volatilities were generally low to medium compared to the last 12 months.
- Option volatility will have been relatively high as volatility of volatility was relatively unchanged but moves in underlying prices were large during the month. Volatility of volatility for the US fell to 148% (High).
- Commodities’ price moves were once again sharply downwards. Volatility moves were also upwards: e.g. Oil up to 64% (High).
- Real Estate (equity) price moves were again strongly downwards. Volatility changes were sharply up: to 23% in the US (High) and up to 25% in Europe (High), and Japan up to 38%. PE Funds and Hedge Funds prices fell again, with volatility trends mixed.
Read the full Market Risk Report here.
View the online version of our February Newsletter here.