Equity implied volatility has reached record lows in Asia in recent weeks as vols globally continue to slump. "It's not just equity implied volatility that has fallen, other risk measures such as corporate credit spreads have also narrowed. There seems to be a widespread tendency to perceive the world as a relatively un-risky place," said Justin Kennedy, managing director in Asia-Pacific equity derivatives at Citigroup in Hong Kong.
Six-month implied volatility in Korea has fallen to19% and in Hong Kong averages are around 13%. That's against levels six months ago of 30.8% and 17.5%, respectively. Traders also noted clients continued selling of volatility via equity-linked note structures has helped to suppress levels. "I don't really foresee any sort of increase in vols on the horizon," said a senior official at a European house. However, some market professionals recently have started to see a smattering of interest from hedge funds that believe levels have bottomed out.
