📈📉How will changes in implied volatility affect structured warrants?
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Following the announcement on 31 July of the Bank of Japan’s decision to increase rates to a policy rate of around 0.25%, the Nikkei 225 Index (NIKKEI) closed higher on Wednesday but then took a downward turn to drop 8.2% over Thursday and Friday to end the week at 35,909.70. As of this morning, the index is trading another 5.8% lower to 33,823.20.
The volatility in the Asian indices echo the global sentiment of recession fears in the U.S. economy amid weak economic data releases from the previous week.
During volatile periods in the market, market makers may adjust the implied volatility (IV) levels of warrants to ensure they reflect the market’s changes in volatility accordingly, which in turn impacts warrant prices.
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