Financial crash probability has receded

Posted on 29. Jul, 2010 by Jean Jacques Ohana in Weekly Focus

Banks stress tests have proved to be a non event. Everyone knew the results in advance: overall the solidity of the banking sector has been supposedly established and only seven banks out of 91 failed the exam. The stress tests were not too stringent as sovereign bonds held to maturity have been excluded from the [...]

Is deflation behind the dollar drop?

Posted on 18. Jul, 2010 by Jean Jacques Ohana in Weekly Focus

The past month has seen a surprising dollar bearish move across the board. The dollar drop has been particularly acute against European currencies but has concerned every currency from yen to Latam. Nevertheless, this move must not be interpreted as a positive liquidity move since the most pro-cyclical currencies, i.e. commodities currencies and emerging currencies [...]

The inefficient market hypothesis

Posted on 15. Jul, 2010 by Jean Jacques Ohana in Weekly Focus

The configuration of risky asset classes has been highly interesting these last weeks. Equities have experienced series of daily run ups and falls. As a matter of fact, the Euro Stoxx 50 made 6 consecutive bullish closes in a row twice in the same month.

The probability of observing 6 consecutive closes in the same direction [...]

The dead cat bounce before a crash in August?

Posted on 09. Jul, 2010 by Jean Jacques Ohana in Weekly Focus

In the last two days, risky asset classes have rebounded sharply from their lows following the release of the European stress tests methodologies. The latter will assume a loss of 17% (relative to face value) on Greek bonds and 3% on Spanish Bonds. From January 2010, total return performances have been -16.5% on Greek Bonds [...]

Three facets of the new financial crisis

Posted on 04. Jul, 2010 by Jean Jacques Ohana in Weekly Focus

The issues in financial markets are multidimensional, which makes the crisis more and more severe.
G10 sovereign solvency
The G10 sovereign solvency problem takes its roots into the 2007/2008 financial crisis. Indeed, the banking system failures required Governments bailouts and massive fiscal stimulus to foster growth. Governments have substituted public debt for private debt. As a result, [...]

The new face of safe havens

Posted on 01. Jul, 2010 by Jean Jacques Ohana in Weekly Focus

We have predicted market vulnerabilities since the end of April. And as market dislocations materialize, let us tackle the issue of hedging the risk of future rounds of defiance towards risky asset classes.
The answer can be inferred from a proprietary indicator called the “crash risk beta”. The latter expresses the sensitivity of an asset class [...]