News & events

Inflection

by The Arkus Risk Team

  • Volatility changes were mostly downwards on the high levels of December, outside FX and Government Bonds. Asset volatilities were almost all medium to high relative to their 12-month averages.
  • Realized volatility (of the Euro Stoxx50 index over 30 days) fell from 19.0% to 12.8.0% (high down to medium).
  • Equity market price moves were sharply positive. Volatility trends were upwards. Sector volatilities spanned a range of 11-26% and were medium relative to the last 12 months, except for Information Technology that is still in a higher volatility regime.
  • Sovereign bond price moves were strongly positive in Germany and the US with a small decline in Japan and Italy. Volatility trends showed a mixed picture. Germany and the US increased in volatility and are now in a medium and high volatility regime, 3.9% and 4.8% respectively. Italy and Japan were unchanged at high and low regimes, 5.1% and 1.1% respectively.
  • FX moves were up against the euro, with the pound gaining 2.9% Volatility moves were all upwards and ended at 5-8%. Volatilities relative to the euro were all high with the exception of the Swiss Franc which increases from low to medium.
  • Option volatility will probably have been low, as underlying price moves during the month were very moderate, and volatility of volatility changed from a medium to a low regime. Europe decreased from 160% to 80% and the US decreased from 154% to 113%.
  • Commodities’ price moves were moderate, but with steady and significant. Volatility moves were mixed e.g. Oil decreased from 54% to 30% (still medium), Copper increased from 20% to 23% (medium up to high) and Gold largely unchanged at 8% (low).
  • Real Estate (equity) price moves were sharply up, steadily recovering all losses during December. Volatility moves were down and finished at 11-15% (Japan unchanged at high, US and Europe down from high to medium).
  • PE Funds and hedge funds showed steady but strong gains with a decrease in volatility (from high to low) for the average hedge fund (2.7%) and a still a high volatility regime for the average PE fund (11.7%).

Read the full Market Risk Report here.here.