Financial Markets Update - Q2 2009
Document ID: 2009-1497
Published on: 3rd July 2009
Author: Harry Hibbert & Jingyi Liu
Developments over the quarter have been positive. There is evidence that markets might be beginning to stabilise and that volatility levels are falling back. But, we believe that it would be unwise to conclude that this trend is definite or guaranteed to continue in the second half of the year.
Inflation expectations have moved into positive territory for the world’s major economies (excluding Japan) as equity markets have enjoyed a moderate rally and a reduction in implied volatility levels. Credit markets appear to be continuing to stabilise at lower levels across all maturities (especially in the US) and swaption implied volatility has fallen. Yield curves in the four major economies have increased across all maturities.
This report highlights significant financial economic developments in the second quarter of 2009. We include a special issue on the relationship between option implied and real-world equity volatility.
