17 December 2014 by lberuti
People who spent a long week-end on a remote island without internet connection and are back tomorrow morning will probably ask what the fuss was all about. After all, the Ruble is only down 4% since Friday’s close. The S&P 500 and the Eurostoxx 50 are unchanged and credit indices are actually a tad tighter over the same period. But the picture is completely different is you look at the total variation of these assets over the last 3 days. If you take the example of iTraxx Crossover and add the values all the up and down moves since Monday morning, you get a number well in excess of 200bps (the number is 60bps for today’s session alone which felt like a walk in the park compared with yesterday’s rollercoaster) for an index which is worth 353bps as of tonight’s close. The intense volatility of the last few days is also blatant on this grapple which depicts the evolution in cents of the bases (ie the difference of the quoted value of an index and its theoretical value computed from the levels of its individual constituents) of the different European credit indices. The basis of iTraxx Crossover is unchanged on a week horizon at -45cts, but it has moved between +60cts and -60cts, and that is only looking at the closing levels.