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JP Morgan Model Sees Average G10 USD Vol as Overvalued by 1.8 Points

OPTIONS

JPM's weekly FX options screener flags:

  • CAD, PLN, AUD, NZD and HUF vs. USD vols are a buy from a beta-to-vol angle, while CNH, INR, TRY, RUB and KRW are a sell, adding that ZAR, HUF, PLN, BRL, MXN, AUD, NZD, CAD, SEK, NOK skews offer value.
  • Based on the underlying rates vols/correlations within USD/G10, AUD 1y vol is rich by 1.6 vols; CAD 1y vol is cheap by 1.9 vols and after the latest rise since mid-July, the rates model now finds the average G10 FX USD vol as overvalued by 1.8 vols.
  • Gradual normalization of FX vol market since mid-March implied most dislocations have corrected already, latest one being AUD, NZD and NOK vol richness, while BRL vol remains overvalued vs other G10 and EM vols.
  • They add that EUR vol is rich vs JPY and CAD vols; CHF vol is rich vs. JPY vol; ZAR, KRW vols are cheap vs. PLN and HUF vols.
MNI London Bureau | +44 203-865-3809 | edward.hardy@marketnews.com
MNI London Bureau | +44 203-865-3809 | edward.hardy@marketnews.com

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