Categories

Archives

German Bund Futures Volatility Forecast (23/05/2011)

The HyperVolatility team was right once again. The German Bund was expected to rise and retest the 124 euro target and effectively the market opened at 124.2 dropped at 124 on Wednesday and then closed at 124.6 euro on Friday.

The current volatility is 0.36% (5.7% annualised) and the TGARCH curve seems to have touched the equilibrium point implying that a potential short term explosion of the conditional variance is not an eventuality to opt out.

On the other hand, it is important to highlight the fact that a large part of the uptrend has been primarily caused by investors seeking some extra returns that seemed to be quite difficult to gain by investing in equity indices which extensively moved sideways throughout the previous week.

The variance is now more likely to augment than it is to drop because the volatility curve has been decreasing constantly for almost 3 consecutive weeks and a mean reverting move is statistically more probable than an ulterior plunge.

The HyperVolatility team is moderately bearish on German Bund futures because an augment in the conditional variance could easily push the market back down in the 123.5 – 124 area.

However, we will place some short position only when the volatility will start picking up and the price action will start showing some sign of weakness because the steadiness of the volatility curve could persist and keep prices in the 124 euro area: high uncertainty.

Leave a Reply

Your email address will not be published. Required fields are marked *

Go back to top