Fri, Apr 18, 2014
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Alternative Market Briefing

Other Voices: The curious case of Asian volatility

Thursday, September 12, 2013

This piece was contributed by David Shin, Associate Director, PAAMCO Singapore

The volatility of volatility is generally higher in Asian markets than in other developed markets. Also, Asian markets typically have skews much lower than those in the West, and we believe a key reason for this is the plethora of structured products sold in the region.

While there are many types of option-linked structured products, some of the most widely issued products in the region are notes designed by bankers to pay a slightly higher yield under "certain conditions." Volatility is often referred to as the "investor fear gauge" as it is generally higher in times of distress.

In the last 15 years there have been several panic situations: the Asian Crisis in the late 90s, the demise of the tech bubble in the early 2000s, the SARS scare in Asia in 2003, and most recently, the global financial crisis of 2008. All these large distress events led to episodes of increased volatility (in some cases radically so). It has been a little less than five years since the last "big event" and volatility levels have reverted to near pre-crisis lows, even though there are still several macro risks and the economies of many developed and developing countries look weak. This drop in volatility can be partially attributed to the provision of liquidity by central banks around the globe to many investors who, in search of yield,......................

To view our full article Click here

Banner
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing
  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. CTAs could face new challenges in a rising rates environment[more]

    Bailey McCann, Opalesque New York: CTAs have taken a beating performance wise lately, and asset flows reports show that investors aren't sticking around to see how the movie ends. Now, a new white paper from Roy Niederhoffer and Coen Weddepohl notes that as interest rates start to tick back u

  2. Investing – Big hedge funds bought Puerto Rico's junk bonds, Fidelity explores new trading venue amid flash trade concerns, Crisis-era Greek bonds reward early buyers with big effective returns, Cargill unit discloses stake in Freddie preferred[more]

    Big hedge funds bought Puerto Rico's junk bonds From Reuters.com: Several large hedge funds doubled down on Puerto Rico in last month's giant bond sale despite the U.S. territory's financial struggles, the Wall Street Journal reported, citing confidential documents reviewed by the newspa

  3. Opalesque Exclusive: Classic Auto Funds Limited (CAF) launches several car investing funds[more]

    Bailey McCann, Opalesque New York: A new trend in alternative alternatives is emerging - car appreciation funds. Classic Auto Funds Limited (CAF) is the first to market with several funds that make super elite luxury cars into real asset investments. As a result of growing overseas demand couple

  4. Commodities – Popular value fund manager David Iben bets on Russia, gold,[more]

    From Reuters.com: With large bets on Russia and North American gold miners, one of the best performing stock pickers in the wake of the 2008 financial crisis is back with a new fund that reflects his deep aversion to following the crowd. In the Kopernik Global All-Cap Fund, David Iben is follo

  5. Opalesque Exclusive: Pensions, endowments, family offices reconsider life settlement investments[more]

    Bailey McCann, Opalesque New York: Hedge funds were once the largest investors in the life settlement industry, now the industry is seeing more interest from pensions, endowments and family offices directly. Life settlements have always been considered a niche part of the investing landscape, an