Will commodities rise defy European solvency issues?

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

As presented in the following charts, the average 1 year curve on a diversified basket of 17 commodities has dropped to record levels. This curve evolution to backwardation reflects depletion in global commodities inventories and supply tensions among various materials. Cotton and Sugar show the most significant 1 year backwardation to 40% and 30% respectively, [...]

Euro-zone sovereign solvency risk and systemic contagion

Posted on 13. Dec, 2010 by Jean Jacques Ohana in Weekly Focus

From the latest 5 Yrs CDS quotes of various euro zone countries, we can infer the implied cumulative probability of default.

The one year probability of default p may be deduced from the following approximate relationship:

where s represents the CDS price and R represents the recovery (presumably around 35%/40% for OECD countries). This relationship is obtained [...]