To the extent there has been any, it has been very short-lived. (Graph 1) In the past few weeks, volatility has picked up, predominantly in foreign exchange markets, which I will come back to a bit later. But even so it has not yet returned to a ‘normal’ level of volatility.
So volatility has been low for a prolonged period of time in the face of a number of events which individually would normally be associated with high volatility, let alone all of them happening at the same time. Why is this happening?