There was almost panic to buy FX options late on Friday amid fears of an escalation in the Israel conflict over the weekend, with many of the benchmark 1-monthnearing recent highs amid the usual post weekend mark-ups early on Monday.
EUR/CHF dealers noted increased demand forand a jump in EUR put/CHF call volatility premiums on risk reversals.
Broader front end expiry implied volatility is now easing with the USD, but risk reversals are slower to surrender any USD and CHF call premium.
EUR/USD risk reversals are trading their strike volatility premium since March.
However, despite the geopolitical risk being evident in other currency pairs, USD/JPY implied volatility has been falling.
One-week expiry trades 18-month lows below 6.0 - suggesting when compared with realised/actual volatility measures from the previous week.
One-month expiry implied volatility is closer to its long-term lows than its G10 FX peers, but does retain a slightly bigger premium to 1-month historic/realised volatility.
Two-month expiry G10 FX options have seen a pick up in demand since that expiry dated moved to Dec.
14 late last week.
It includes interest rate from the U.S., Eurozone, UK, Switzerland and Norway.
expiring this week.
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