拉美地区-投资策略-墨西哥元：褪色还是新常态.pdfVIP

FOCUS | VOL FOCUS 05 November 2018 QUANTITATIVE & DERIVATIVES M X N – A f a d e o r a n e w n o r m a l ? I n v e r t e d AT M v o l a n d f l a t r i s k i e s t e r m - s t r u c t u r e KEY MESSAGES • USDMXN ATM vols and risk-reversals rallied 3.3 and 1 points respectively over the last couple of weeks, and are currently trading at levels (i) similar to those of the July 2018 Mexican elections, but (ii) below the extremes observed during the November 2016 US elections. • While opining on whether recent political developments represent a new norm or a market over-reaction is beyond the scope of this publication, it is interesting to highlight that during the broad USD rally in the two months after the 2016 US elections, USDMXN risk-reversals sold off relative to ATM vols, as investors converted outright long calls to ratios or other medium range plays. • The term-structure of ATM vols is inverted, while the term-structure of risk-reversals, although not inverted in the strict sense, is very flat and only exceeded during the 2016 US elections. • Investors expecting that the recent MXN weakness is the new norm may monetize inverted ATM vols and flat risk-reversal term structures via 1x1 or light ratios of topside Calendar Spreads. These constructs are long vol but short riskies. • Alternatively, they may sell front end topside strikes against long cash positions. • Investors who prefer to fade current MXN weakness may m