What is behind the fall in cross assets correlation?

Posted on 30. Mar, 2011 by Jean Jacques Ohana in Weekly Focus

The correlation among risky asset classes has sharply dropped as showed in figures 1 to 3, the average correlation has collapsed from 0.55 to 0.3 in a path reminiscent of the first semester of 2008, where commodities experienced a sharp bull run while equities pursued a negative trend.

The network density has notably receded and, as [...]

Drawing the first lessons of the Japanese tragedy

Posted on 22. Mar, 2011 by Jean Jacques Ohana in Weekly Focus

A succession of Black Swans hit Japan last week: a major quake, a tsunami and a nuclear meltdown. The chain of events has the characteristics of Nassim Taleb’s tail events insofar as it is completely exogenous, sudden and unpredictable while being a major event. The Japan TPX fell 10% and was selected in Riskelia’s model [...]

Using VIX futures contracts as a hedge against increased uncertainty

Posted on 15. Mar, 2011 by Jean Jacques Ohana in Weekly Focus

The dark clouds are accumulating over the horizon: not only do we have to worry about 1) the euro zone sovereign debt problem, which has known a recent aggravation and to which the European leaders have once again failed to bring a definitive answer at the last European summit, 2) the MENA unrest, 3) the [...]

How did the Radar anticipate the ECB interest rates hike?

Posted on 08. Mar, 2011 by Jean Jacques Ohana in Weekly Focus

The announcement of a future interest rates hike from next month onwards by Mr Trichet, the ECB chairman, seemed to have surprised many markets participants.
Meanwhile, Riskelia’s Radar has signaled a bearish trend on bonds and interest rate contracts for more than one month. Here is why.
For several weeks, ECB governors have tightened their tone against [...]

What asset class would sustain a fourth oil price shock?

Posted on 01. Mar, 2011 by Steve Ohana in Weekly Focus

The turmoil in Maghreb and Middle East has put the risk of a sharp rise in oil at the forefront. Asset allocators, producers and consumers have incorporated a significant geopolitical risk premium into the oil price as a hedge against possible disruption in oil supply from Libya, Algeria, not to mention Iran and Saudi Arabia.

Should [...]