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巴黎银行-新兴市场-外汇策略-南非和印度大选:市场对外汇意味着什么?-0419-10页.pdf
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巴黎银行-新兴市场-外汇策略-南非和印度大选:市场对外汇意味着什么?-0419-10页.pdf
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1
Luc
a Maia, EM/LATAM FX/IR Strategist | Banco BNP Paribas Brasil
B
urak Baskurt
,
EM/CEEMEA FX/IR Strategist | Bank BNP Paribas London
Dawn Kwa, Asia FX/IR
Strategist
| BNP Paribas Singapore
Branch
|
FOCUS
18/
04/19
[1]
I
mplied Distributions from GBPUSD Risk
-
R
eversals and Implication for Brexit Scenarios; 13 June
SA a
nd India elections – what do the markets imply for FX?
KEY MESSAGES
T
raders economists and central bankers evaluate market
views. The difficulty is that markets speak in terms of prices
and extracting ‘their implied scenarios’ is inherently difficult.
We use FX implied volatility distributions to analyse what the
markets are pricing in and to gauge the probability of one-off
events happening.
In South Africa, our analysis ascribes a 64% probability to
ZAR appreciation (by 1.2%) after the general election on
8 May and a 36% probability of depreciation (by 2.2%).
In India, the implied election premium is higher, as the polls
predict a slim majority for the incumbent coalition. Our
analysis implies a 62.7% probability of INR appreciation (by
1.4%) against a 37.3% probability of depreciation (by 2.4%).
The elections began on 11 April and end on 19 May.
Using our special events model
Our analysis uses the same special events model that we
applied to Brazil’s and Mexico’s presidential elections last
year. Our methodology uses FX volatility smile data (pre and
post election) to calculate the implied probability of an event
happening, given a binary outcome.
Last year, we were able to infer that the markets had already
priced in the election outcome almost a month before the
election and there was no substantial market move on the
day after the election. For Brazil, our expected BRL
appreciation movement of 1.6% was also realised a day after
the presidential election last October (Brazil – Markets now
pr
ice a smaller premium for elections).
We model a presidential election as a probability density
function (we call it forward jump PDF), comprising a mixture
of two log-normal distributions ‒ one in the event of an
appreciation; the other in the event of a depreciation.
Our proposed approach is based on the work of Clark and
Amen
[1]
.
The model offers two important advantages: (i) It
can be used as an inference tool to complement investment
decisions for any asset class; and (ii) it can be applied to any
country and to a particular event. See Introducing BNPP
ex
ceptional events model: Mexican presidential elections.
Fi
gs. 1-2: Implied volatility smile PDF and forward jump PDF* – South Africa
Sources: Bloomberg LLP, BNP Paribas; * data as of 18 April 2019
US
DZAR (Fwd) 5% band Expected move 95% band
Implied probability of USD going down 63.9% -4.6% -1.2% -0.2%
Implied probability of USD going up 36.1% 0.1% 2.2% 10.6%
0
5
10
15
20
-
12.0% -7.0% -2.0% 3.0% 8.0% 13.0%
O
riginal PDF after elections
O
riginal PDF before elections
USDZA R Forw ard
M
arket PDF before and
after the election day
0
10
20
30
40
50
-
5.1% -4.3% -3.4% -2.5% -1.6% -0.7% 0.2% 1.1% 1.9% 2.8% 3.7% 4.6% 5.5%
M
arket implied volatility probability distribution
U
SDZAR going up; probability distribution
U
SDZAR going down; probability distribution
M
arket expectation for USDZAR one day
before and after South Africa General
elections - 8 May 2019
Z
AR Appreciation ZAR Depreciation
FOCUS | EM Strategy
19 April 2019
EM
STRATEGY
Please refer to important information and
MAR disclosures
at the end of this report
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