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Ukraine Market Implications

Ukraine Market | Russia credit default swaps | Volatility | Stress testing


 

Join us on 22 November 2022 for a webinar on the impact of the Ukraine crisis on financial contracts.

Nine months after the outbreak of the war in Ukraine, this #webinar will consider its impact on #financialcontracts, focusing on the industries of lending, #assetmanagement and risks hedging. It will gather the first lessons learnt so far and assess trends for the immediate future, looking at these subjects from a global perspective.

Moderator:
Jean-Francois ADELLE, Jeantet - avocats

Speakers:
Daniel Karlsson, Mannheimer Swartling
Richard Levett, Enyo Law LLP
Leslie Rahl, Capital Market Risk Advisors (CMRA)
Robert Ward, International Institute for Strategic Studies

Register here

#bankinglaw #finance #law

 

The Russian invasion of Ukraine, while first and foremost a horrific humanitarian disaster, has enormous implications for financial markets, financial contracts, and financial market dispute settlement.

  • Our insights into Ukraine market about stress testing

“Unexpected” Financial Shocks — Once in a Lifetime Crises Seem to Occur Every Few Years

Prime finance Roundtable 5/3 presentation by Dr. Peter Niculescu

1. “Unexpected” Financial Shocks — Once in a Lifetime Crises Seem to Occur Every Few Years

2. VIX & VIX Move Index

3. VXX Index

4. VIX Term Structure

5. Ruble/USD

6. Russia 5 yr CDS

7. Nickel

Take a Close Look at your Stress Test Assumptions: Implied Volatility is Up in Most Asset Classes (VIX, MOVE, FX)

With supply chain pressures, inflation, a possible recession, and a war, it is not surprising that options prices and implied volatility are up. It's like déjà vu all over again. As senior practitioners at Capital Market Risk Advisors (CMRA) with more than 30 years’ experience each, we’ve seen this movie before. Those who don’t learn from history are forced to repeat it.

Risk managers should react appropriately. It’s ok to be surprised when an unlikely event happens, when markets move or when relationships change. But, as experienced risk managers, we believe strongly that it is NOT ok to be surprised by the impact of a market or relationship move. That’s what proper stress testing should inform you about. At CMRA, we have seen all too many problems that happened when clients had not adequately stress tested their sensitivity to assumptions.

What is notable this time is that forward volatility is up for many months into the future. Typically, higher implied volatility leads to backwardation, where longer dated-volatility is lower than short-dated. But today, equity market implied volatility is high, and the volatility curve is flat all the way out to 2023. The market expects volatility to stay high for longer than is typical.

In times of high volatility, it is critical to stress test your sensitivity not only to market levels but to assumptions about correlations, term structure, the volatility surface, and to other markets such as Forex and commodities. At CMRA, we have seen all too many problems that have happened when clients did not adequately stress test their sensitivity assumptions.

  • Information from ISDA relating to the impact of Russian sanctions on derivatives markets

Russian Sanctions and Market Impacts InfoHub – International Swaps and Derivatives Association

Tags: CDS, Equity, FX, Hub, LME, Market Closure, Market Disruption, MOEX, Moscow Exchange, Nickel, Russia, Sanctions, Ukraine

  • Russian debt news

Russia pushed into historic default by sanctions - Reuters - June 27, 2022

Russia rejected claims on Monday that is had defaulted on its external debt for the first time in more than a century, telling investors to go to Western financial agents for the cash which was sent but bondholders did not receive.

Committee Delays Decision On Russian Debt Payment Failure - Law360 - June 9, 2022

An international derivatives committee said Thursday that it will defer making a decision on whether to hold an auction of credit default swaps after Russia failed to pay off part of the interest on its sovereign bond debt.

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