Despite the ructions all around the world (in case you’ve forgotten, here’s a good list from Nouriel Roubini), volatility remains pretty low all around the world.
Even in the midst of what some might call a Black Swan (Fukushima), the strike against black swans continues.
In a note out today, Bofa/ML looks at the cost of hedging against big downside risks all around the world. The conclusion:
KOSPI2 (Korea) and ASX200 (Australia) offer similar protection as S&P for ~60% of the cost. Currently, KOSPI2 and ASX200 indices offer most value in hedging against risk-off events, potentially yielding the same level of protection as equivalent S&P hedges for about 60% of the cost.
Of course, this assumes that if you’re, say, exposed to the S&P, and everything goes to hell there, that the KOSPI would follow some similar trajectory, and obviously that’s not the case. But considering that Korea has its own big “risk off” threat (North Korea) and that it’s exposed to some of the big question marks aroun [Chinese demand, the Japan stuff (to some extent)] it’s at least an intersting idea.
This chart shows which indices are “cheap” to hedge relative to US stocks.