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Articles tagged with: FOREX

19 September 2011

European Equity Index Volatility

With the EU debt crisis occupying front page headlines since early August, all eyes have been on the major European stock indexes. Markets have been attempting to come to terms with lackluster EU-zone growth projections, undercapitalized banks, and (worst of all) structural contagion due to the spectre of sovereign default.

Here are the current major Equity indexes and their associated realized volatilities measured since August 1.

IndexRealized VolatilityRealized Volatility FX Included
CAC39.62%43.85%
DAX52.32%56.68%
MIB48.70%55.42%
IBEX43.71%61.95%
ATHEX58.14%50.53%
FTSE34.32%36.71%

The results in column 1 were calculated independent of currency exposure, such that each volatility is based on index returns only. Column 2 index volatilities are measured from a USD perspective in that the results include the volatility of the index as well as the un-hedged currency exposure of a USD-based portfolio manager invested in each index. In all cases except for the FTSE 100, the un-hedged currency exposure is due to the EURUSD exchange rate (for the FTSE the exposure is due to GBPUSD rate).

Of startling note is the wide margin between the Euro-zone index volatilities and that of the UK-based FTSE-100. The decision by UK voters not not participate in the Euro is certainly presenting itself quite starkly in these statistics.

The results above were calculated using The RiskAPI Add-In, our unique software client which allows fund managers to access a whole spectrum of on-demand portfolio risk analysis calculations.

09 September 2011

Currency Risk: Major Event in the Swiss Franc

This week saw probably the largest one day move in a major currency in the last 20 years.

YTD realized volatility for USDCHF was at 12.99% as of Monday, September 5th. On Tuesday, September 6th, due to the SNB's announcement that it would purchase "unlimited quantities" of non CHF currencies to keep it at 1.20 (number of Swiss Franc per 1 Euro) or lower, the Franc experienced a devaluation of almost 9%. Quoted in Francs (USDCHF), the currency rate moved from 0.7865 to 0.8568.

To appreciate the magnitude of this one-day event, using YTD data, a single standard deviation represented a move of 0.81% in the USDCHF exchange rate. Tuesday's event resulted in a shift of 8.9%, equivalent to roughly TEN TIMES this amount.

Critics of G-7 central banking policies will, no doubt, jump on such data as proof that the stated mission of "price stability" is proving to be out of reach lately.

Current YTD realized volatility for USDCHF as of September 8th stands at 16.51%

The results above were calculated using The RiskAPI Add-In, our unique software client which allows fund managers to access a whole spectrum of on-demand portfolio risk analysis calculations.