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Cost to hedge against price swings in Swiss franc, euro soars

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The cost to hedge against volatility in the Swiss franc over the coming month spiked to its highest in over three years on Thursday after the Swiss National Bank abandoned its three-year old currency cap.

[LONDON] The cost to hedge against volatility in the Swiss franc over the coming month spiked to its highest in over three years on Thursday after the Swiss National Bank abandoned its three-year old currency cap.

The franc soared by up to 30 per cent in value against the euro after the SNB shocked markets with a surprise move.

One-month euro/Swiss franc implied volatility surged to 24.675 per cent, its highest since September 2011, when the cap was set.

That marked the biggest jump in the price of the option since the euro's launch in 1999.

As the euro fell to an eleven-year low, the one-month euro/dollar implied volatility also spiked above 11.3 per ceNt to its highest since June 2012.

One-month dollar/Swiss franc implied volatility also hit its highest since 2011 at 23.7 per cent.

REUTERS

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