Arkus Focus January 2017
Fear of heights
by Niall O'Connor
- Volatilities fell in December and were typically low relative to their 12-month averages.
- Realised volatility (of Eurostoxx index over 30 days) fell from 12.6% to 11.5% (low).
- Equity market price moves were mixed during the month. Volatility trends were all downwards. Sector volatilities fell to 9-12%. Sector volatilities were all low or medium relative to the last 12 months.
- Sovereign bond price moves were mixed. Bond volatility changes were all upwards, ending at 4-6% (but down to 1.5% in Japan). Japan was low, US medium and Germany high.
- FX price moves were much smaller than the prior month. Volatility trends were mixed: e.g. €/£ up to 11.4%. Volatilities were low for most major currencies relative to the euro, except €/$ which was high.
- Option volatility will likely have been mixed, driven by falling volatility of volatility but with some large moves in underlying prices during the month. Volatility of volatility for the US ended at 82% (low).
- Commodities’ price moves were mixed, with Oil rising +12.6% but Gold -1.6%. Volatility moves were downwards e.g. Oil sharply down to 32% (low).
- Real Estate (equity) price moves were all upwards. Volatility were all down and finished at 17.1% in the US (medium) and 14.5% in Europe (low). PE Funds prices rose again, with volatility trends in PE and hedge funds downwards.
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