By Richard Pace — Jan 24 - 05:52 AM
• FX Option implied volatility slumped as Trump risk premiums pared this week
• Better risk sentiment/weaker USD help drive broader option premium decline
• Initial losses slowing but AUD/USD implied vols have more downside potential
• AUD/USD fair value historic/realised volatility is below implied volatility
• Post US election lows (Nov. 8) still a few ticks below current levels, too
• AUD/USD downside risk premium on 1-month risk reversal post election low
0.6
AUD/USD 1-month 25 delta risk reversal
AUD/USD implied volatility
AUD/USD implied vs historic/realised volatility
(Richard Pace is a Reuters market analyst. The views expressed are his own)
Source:
London Stock Exchange Group | Thomson Reuters