The Swiss black swan bad scenario: is Switzerland another casualty of the Eurozone crisis

Sebastien Lleo and Bill Ziemba

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Financial disasters to hedge funds, bank trading departments and individual speculative traders and investors seem to always occur because of non-diversification in all possible scenarios, being overbet and being hit by a bad scenario. Black swans are the worst type of bad scenario: unexpected and extreme. The Swiss National Bank decision on January 15, 2015 to abandon the 1.20 peg against the euro was a tremendous blow for many Swiss exporters, but also Swiss and international investors, hedge funds, global macro funds, banks as well as the Swiss central bank. In this paper we discuss the causes for this action, the money losers and the few winners, what it means for Switzerland, Europe and the rest of the world, what kinds of trades lost and how they have been prevented.

Keywords: Swiss franc; euro peg; black swans; currency trading losses; Swiss exports; quantitative easing; negative interest rates. intermediation (search for similar items in EconPapers)
JEL-codes: B41 C12 C52 G11 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2015-08
New Economics Papers: this item is included in nep-eec
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Journal Article: The Swiss Black Swan Bad Scenario: Is Switzerland Another Casualty of the Eurozone Crisis? (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:65107

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