GWO, PWF PerpetualDiscounts: Implied Volatility Goes Negative

The recent slide in PerpetualDiscounts has been particularly hard on insurers – and particularly the lower coupon issues in a continuation of the trend discussed in MAPF: February Performance.

In fact, implied volatility has gone negative:


Click for Big


Click for Big

Both graphs have been prepared using the Straight Perpetual Implied Volatility Calculator and, for purposes of the theoretical curve, setting the implied volatility to 15% / 3 Years.

This entry was posted on Monday, March 22nd, 2010 at 11:20 pm and is filed under Issue Comments. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

One Response to “GWO, PWF PerpetualDiscounts: Implied Volatility Goes Negative”

  1. MAPF Performance: April 2011 « PrefBlog says:
    May 13, 2011 at 10:25 pm

    […] time to time – in the spring of 2010, I noted that the relative prices for these two issues reflected negative Implied Volatility (which cannot actually be calculated because the math blows up). It happens. Sometimes, when the […]

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