The Swiss Black Swan Bad Scenario: Is Switzerland Another Casualty of the Eurozone Crisis?
35 Pages Posted: 8 Jul 2015
Date Written: June 15, 2015
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: Suggested Citation