16 May 2013
16 May 2013
FX Blueprint: Dashing Buck
GI0 and hence is susceptible to rebound. Within the
Eurozone, another factor to consider is the risk
sensitive safe-haven unwinds (mainly from Switzerland
and the UK) which could further add to this trend.
The favoured trades
In sum, a further increase in trading volumes and
monetary policy divergence could see a broad-based
volatility pick-up. Looking across a number of relative
value trades, we recommended buying a 6M GBP/USD
variance swap struck at 7.75%. and a 3M AUD/USD
variance swap (9.00% strike), due to the low
transaction volumes in GBP/USD and attractive
historical realized volatility levels (see chart 6).
Furthermore, these trades benefit from the negative
spot-to-empirical volatility skew.
Nicholas Weng, London,
James Malcolm, London,
Pago 20 IGBP/USD volumes falling sharply in 2013
— GBPUSO 2W vaume
—2W eabsed vcialny (RHSi
Ms-11 Jul-11 Nov.11 Me, I? Jul-12 NDv-12 Mw-13
SIXOTI Ms, Nocvntwo nnirce
Options mar ket ADVs on the rise
10
6
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Mor.11 Jull I Nov-II Mar-12 Jul•12 Nov.12 Ma r• 13
Sant' CAW roe —GBPUSO 1 M opoons volume
GBP 1M realised volablety IRKS, '2
TO
4
2
0
IAUD and GBP realised volatilities are historically cheap
2
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05
0
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