Corporate Press Release

Press Release

Credit Suisse Launches New FX Volatility Indices

Credit Suisse today launched two new investable volatility indices which are designed to provide a cost-effective way to gain exposure to currency volatility. The Credit Suisse Advanced Volatility Index series – FX (CSAVI-FX) - has the characteristics of a hedge against sharp declines in traditional risk assets and is intended to offer investors protection during periods of high market volatility.

Credit Suisse is now offering the following indices:
- The CSAVI-FX Opportunistic
- The CSAVI-FX Opportunistic Long Only

The indices represent the returns from strategies developed by Credit Suisse’s Algo Strategy and Modelling team which help investors analyse currency movements and volatility levels before entering into volatility trades. The main Opportunistic index represents returns on a trading strategy which can go long and short volatility while the long-only index reflects values from a strategy that is restricted to buying volatility positions.

The strategies monitor 12 different currency pairs and use a “jump-diffusion” model of exchange rate dynamics to forecast large jumps in exchange rates which push volatility higher. This analysis allows the model to assess more accurately when current implied volatility is over- or underpriced. When making trading decisions, the strategies also take into account the liquidity available in the underlying currency pairs to help maximize returns even if bid-offer spreads are wide.

Credit Suisse will offer clients the ability to easily and simply gain exposure to these indices using total return swaps. The ability to trade this kind of strategy in an index makes the foreign exchange volatility market much more accessible to asset managers who, otherwise, would be unwilling or unable to execute, monitor and manage a wide range of over-the-counter FX volatility market trades.

“As CSAVI does not incur the hedging premium associated with direct hedges in the equity options market, we believe it offers the right balance of cost efficiency and general tail risk hedging characteristics for the current environment,” said Chiente Hsu, Head of Global Algo Strategy and Modelling at Credit Suisse.