brexit volatility

Anatomy Of A Flash Crashing Black Swan

Let's see, in 2015 there was the Swiss franc in January, German bunds in April/May, Chinese stocks over the summer, the Chinese yuan on August 11, and then global stocks less than two weeks after that. I'm talking, of course, about black swan events. Or perhaps I should say "grey" swan events because while rare, some of them were not entirely unexpected. For instance, anyone who was paying attention could see that China would need to devalue sooner or later in order to preserve the illusion that the export-driven economy was growing at a (near) 7% clip. Similarly, it wasn't hard to predict that Germany might end up experiencing its own version of 2003's Japanese VaR shock, given that ECB QE was artificially suppressing volatility and thus allowing vol sensitive investors to lever up in safe haven German debt. Have a look at the following set of charts (which I've shown before) that, when taken together, certainly seem to suggest tail events are happening more often in the post-crisis world: (Charts: Citi) What's causing these 6,7,8,9,...16 sigma events to occur with alarming regularity, you ask? Well, some are policy driven but we can't forget the role that illiquid marke
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2 comments on “Anatomy Of A Flash Crashing Black Swan

  1. […] Navinder Singh Saraon roolista ei liene vieläkään täydellistä selvyyttä. Pienempiä hyvin nopeita markkinaromahduksia tapahtuu kuitenkin kaiken aikaa, mutta kaikkiin pikkuromahduksiin eivät ole algoritmit […]

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