The Swiss Black Swan Bad Scenario: Is Switzerland Another Casualty of the Eurozone Crisis?

35 Pages Posted: 8 Jul 2015

See all articles by Sebastien Lleo

Sebastien Lleo

NEOMA Business School

William T. Ziemba

University of British Columbia (UBC) - Sauder School of Business; Systemic Risk Centre - LSE

Date Written: June 15, 2015

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

JEL Classification: B41, C12, C52, G01, G11

Suggested Citation

Lleo, Sebastien and Ziemba, William T., The Swiss Black Swan Bad Scenario: Is Switzerland Another Casualty of the Eurozone Crisis? (June 15, 2015). Available at SSRN: https://ssrn.com/abstract=2627822 or http://dx.doi.org/10.2139/ssrn.2627822

Sebastien Lleo (Contact Author)

NEOMA Business School ( email )

Reims
France

William T. Ziemba

University of British Columbia (UBC) - Sauder School of Business ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada
604-261-1343 (Phone)
604-263-9572 (Fax)

HOME PAGE: http://williamtziemba.com

Systemic Risk Centre - LSE ( email )

Houghton St, London WC2A 2AE, United Kingdom

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