IT’S VOL-MAGEDDON !!! Third Part


After a comprehensive study of the equities (Part I) and commodities (Part II) markets volatilities in 2018, we are now going to focus on the volatility of the main currencies. The USD being the reserve currency, and therefore the most traded worldwide, we shall examine the behavior of the volatility of several other currencies priced against the USD. Typically the volatility of the EUR vs the USD (EUR/USD) or the volatility of the so called cable (GBP/USD). As it would be neither convenient nor interesting to study a large number of currencies pairs, we shall reduce the sample of currencies to five different ones: the two most liquid, EUR and JPY, the GBP (ahead of Brexit), the Chinese yuan CNY (in these times of trade war) and the Brazilian Real (BRL) for the emerging markets currencies. We will refrain from talking about the frightening collapse of the Venezuelan Bolivar or the permanent devaluation of the Pakistani rupee as they are small markets in which available volatility data are few and far between. And for each of the five currencies of the chosen sample, we’ll study the evolution of their volatility against the USD, usually the implied volatility as the currencies options markets are very liquid, trying to explain why it moved, or not… And we’ll exhibit some facts that might surprise a few readers. So let’s start with the EUR/USD pair. A story which could be titled:

Please leave the genie in its bottle.


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