Why the credit crunch in European countries? Because this deleveraging was accelerated by the fateful decision taken by the European Banking Association of imposing European banks to reach a Core Tier 1 capital ratio of 9% by June 2012. It has not only broken the credit transmission mechanism to the real economy in Europe but caused a credit crunch as well.
By Martin T., Macronomics “If you change the way you look at things, the things you look at change.” – Wayne Dyer, American psychologist Yesterday we touched on the implications relating to regime changes in the volatility space. The phenomenon currently in the US is similar in Europe where European equity volatility trading has been… Read More
“The two main drivers of equity volatility are for us, credit availability (Merton model) and revisions of earnings forecasts estimates. Equity volatility is also logically driven by the direction and the magnitude of revisions of forward earnings estimates. In 2010 and again in 2011, equity vol spiked while earnings forecasts remained strong.”
By Martin T., Macronomics “What is at a peak is certain to decline. He who shows his hand will surely be defeated. He who can prevail in battle by taking advantage of his enemy’s doubts is invincible.” – Cao Cao The CDS market is a clear illustration of the surge of Chinese and Korean corporates versus… Read More
While we already touched on the subject of “Rogue Waves” in our conversation “the Italian Peregrine soliton”, being an analytical solution to the nonlinear Schrödinger equation (which was proposed by Howell Peregrine in 1983), being “an attractive hypothesis to explain the formation of those waves which have a high amplitude and may appear from nowhere and disappear without a trace, the latest surge in Spanish Nonperforming loans to a record 10.51% and the unfortunate Sandy Hurricane have drawn us towards the analogy of the 1991 “Perfect Storm”.