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What Markets Said About Brexit
June 24th, 2016
What Markets Said About #Brexit
Jun 24, 2016 · 3 min read
If you were to look at the polling this week, there seemed to be rough consensus that #remain would eek out a tight victory.
Well, depending on where you looked.
Book maker odds told the same story…until they didn’t.
Currency markets were pricing in #remain as well.
However, option markets were not so sanguine. The rise in uncertainty flowed through to increased expectations of market volatility.
Though depends on your perspective. For example, option markets were pricing in less volatility than we saw in January/February period, and much less than we saw last August.
And nowhere near as much volatility as we saw during the global financial crisis of ’08 or the european debt crisis of ’12.
However, for some assets, particularly those exposed to European financial conditions, option markets were pricing in relatively high likelihoods of large drawdowns.
They still are.
Note on the data. This analysis was done on noisy data under time pressure. It should not be relied on to make financial decisions.
Snow provides financial diversification to clients through the construction of hedge portfolios. Some of our portfolios hold ‘short’ positions in equities, in which case those portfolios, and our firm, stand to benefit financially from declining stock prices.
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