Updated with data through February 20, 2014
February 20, 2014 [PDF]
Banks and insurance company equity prices generally recovered some of the declines posted prior to our last report. The stock performance was relatively weak, however. CCAR banks trailed the S&P 500 by about 300 basis points and insurance companies trailed by about 100 basis points. Nevertheless, tail risks, as measured by RNPD standard deviations, fell in both groups as spot prices rose.
There was little change in RNPD statistics related to future inflation and LIBOR rates. One year inflation expectations derived from caps and floors remain centered near 2%. Short-term LIBOR rate expectations derived in a similar manner continue to indicate upward bias.
Banks & Insurance Companies
Option trading on bank stocks was light last week but active for insurance company stocks. Options on AIG, MET, and ALL traded well above recent averages. Skews in both groups continue to trend higher while RNPD standard deviations fell in excess of 100 basis points, on average.
Other Commodity Markets
RNPD standard deviations generally fell and spot prices generally rose across the range of additional commodity markets we follow. Trading activity was mixed. We noted high levels of volume in options on precious metals futures and dollar-pound exchange rate futures.
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