ok, but just remember, what you and I call money and what the fed calls money are two different things 51 Billion? Bill Gates can buy switzerland and it won't be long until somebody can buy (or sell) the US Dollar as a matter of fact, I'm already doing it
I hate to say it, but that's what you get when you change monetary policy overnight. At least the US Fed would signal over a period of time that it would take such a dramatic action. I wasn't in the Swiss Franc when the unpegging took place, but talk about a black swan move.
It did not meet the definition of a black swan event. "First, it is an outlier, as it lies outside the realm of regular expectations, because nothing in the past can convincingly point to its possibility. Second, it carries an extreme 'impact'. Third, in spite of its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable." it definitely does not meet the first criteria. you can quibble over the second criteria, the "impact". third criteria is not relevant because the first criteria of being an outlier was not the situation.
I respectfully disagree - the Swiss move was a 180 standard deviation move. If 180 standard deviations isn't black swan, nothing is.
it did not meet the first condition of an unexpected event based upon the past. a black swan event is not defined as an outsized move. the size of the move is a necessary but not a sufficient condition for defining a black swan event e.g. a company's drug fails a phase 3 trlal and drops 75% this is not a black swan event since it has occurred a number of times in the past. price manipulation schemes including currency manipulation are in the same category.
ha,ha, ha....180 deviation? Black Swan???? If it's Black Swan, there's nobody left to talk about it other than a few lone survivors. If you are talking about and still alive it was not a Black Swan
The difference here is how we are defining "black swan." I'm defining in quantitative terms and what the market is pricing in at the time prior to move. Others seem to be defining according to their own subjective definitions. Look, I'll say up front that I'm not the smartest guy in the room. I can only go off of what the market is pricing in at the time. I estimated the 180 SD calculation, but I'll walk you through the calculation. Annual volatility assumes a 1 SD move. Prior to the move, the annual volatility for the Swiss Franc was a little over 1.7 percent. So there was a 1 SD chance that the Swiss franc would depreciation or appreciate 1.7% in a year's time. This isn't my judgment, this is just what the market was pricing in at the time. To calculate the daily IV, take the annual and divide by the square root of 365, or roughly 19.1. .017/19.1 = .00089 daily volatility. That day the franc moved 19 percent. .19/.00089 = 213 standard deviations. So I was wrong, it wasn't 180 SDs. But the point is, that was a huge daily move and I can still feel bad for the guys who were on the wrong side of the market at the time of the move. It is like a really bad beat in poker - it sucks, you feel bad for them, but it happens to us all from time to time. Just another good reason to stay small.