, Columnist
No One Was Supposed to Lose This Much Money on Swiss Francs
It's kind of cheap to make fun of VaR and margins after a 20-sigma move, but here we are.
One does not normally see sharp right angles in financial charts, but you could pretty much cut yourself on this chart of the volatility of the Swiss franc against the euro:
One straightforward takeaway is: Whoa, that volatility is super high! But perhaps a more useful takeaway is: Whoa, it was super low for a really long time! This is of course because the Swiss National Bank capped the franc's value against the euro: The SNB wanted a price of no less than CHF 1.20 per euro, and the euro itself wanted a price of no higher than CHF 1.20 for reasons of its own,1421432374922 so the result was pretty much a peg at slightly above 1.20. In the 12 months ending on Wednesday, the euro traded in a range of 1.20095 to 1.23640 francs: