Volatility Returns Amid Oil Price Declines, European Developments

Volatility Returns Amid Oil Price Declines, European Developments

Financial market volatility has increased significantly since late 2014. This is a shift from several years of largely depressed volatility, which contributed to excessive financial risk-taking as discussed in the OFR 2014 Annual Report. It remains to be seen whether this is an enduring normalization of volatility and what lasting effect, if any, it will have on financial risk-taking and stability.

Developments since last month

  • Euro area governments reached an agreement on near-term financing for Greece, easing market concerns
  • Oil prices rebounded somewhat, following months of sharp declines
  • U.S. Treasury yields rose and corporate credit spreads narrowed, partially reversing previous trends
  • U.S. equities extended their gains, further stretching valuations