UBS’ Richards: Option Demand To Increase Liquidity Premium

Despite the low volatility fx market environment, demand for options has increased this year creating a competitive market, where dealers have had to make prices that can be challenging to risk manage, Paul Richards, managing director and head of fx distribution for the Americas at UBS in Stamford, Conn. told DW in an exclusive interview. “You’ve got increased demand in the market plus you’ve got the advent of larger funds trying to access the same liquidity and the net result has typically meant more warehousing of liquidity by banks,” said Richards. “We’ve now got the hint that the biggest central bank in the world is going to start tapering, that in itself should elevate volatility, and I think when volatility starts to increase, liquidity can be expected to become more of a premium.”