Back
20 Feb 2013
Forex Flash: FX fair value models say NZD/JPY convexity makes sense - Societe Generale
Sebastien Galy, Senior FX Strategist at Societe Generale notes that FX fair value models say NZD/JPY convexity makes sense
He continues, adding “NZD/JPY is the most expensive making the view of some of being long convexity in this pair sensical. Otherwise SEK is expensive and GBP a bit cheap.” He notes that the medium term models tend to do a poor job in regime breaks and as such GBP can get a lot cheaper before he worries about that signal. Look at JPY though, he feels that it is starting to get as cheap on the LT and MT models suggesting this 90/100 range could well hold. He finishes by writing, “As usual the program, data is available on demand as is the full range of model output (8MB). The enhanced valuation engine is not yet operational, given the horror of dealing with EM data, but getting there.”
He continues, adding “NZD/JPY is the most expensive making the view of some of being long convexity in this pair sensical. Otherwise SEK is expensive and GBP a bit cheap.” He notes that the medium term models tend to do a poor job in regime breaks and as such GBP can get a lot cheaper before he worries about that signal. Look at JPY though, he feels that it is starting to get as cheap on the LT and MT models suggesting this 90/100 range could well hold. He finishes by writing, “As usual the program, data is available on demand as is the full range of model output (8MB). The enhanced valuation engine is not yet operational, given the horror of dealing with EM data, but getting there.”