How Covid-19 exposed the fragility of FX options liquidity

The price action that was seen in foreign exchange markets in March is a useful reminder that liquidity is a most unreliable partner, and teaches us to plan for bad times as well as good.

In February, we were looking at record low levels of volatility in a deep and liquid options market. Apparently impervious to geopolitical events and risk, many wondered if we were observing the final death of volatility. Then, in the space of a month, FX volatility rallied five times higher before dropping