With CNY vols at lows, and given the uncertainty over the growth/inflation
dynamic in China, we see limited downside for vols at this level and
recommend buying a 1Y ATMF straddle at 3.90% as a back-book trade in
case things don't go as planned in China and vols pick up.
Does anyone have any idea?
Sat Jun 25, 2011 1:49 am
coaster Senior Advisor
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Hey Kendara, great to see your post!! I was wondering how things were going with you, what with all the problems over there. And besides, your questions are always so interesting to research!!
I wasn't familiar with the buzz word term "back book", but the trail I followed was that it might be related to "back office" or "back room" which is basically the non-retail department at the brokerage.
Based on what I found, I think that's probably where it comes from. I found a couple references to back-book trading, one in which the broker takes the counter-party for an institutional (non-retail) client's trade when the broker can't find a market trade. The other referred to trades that brokers do for their own accounts. So, I'll just post a couple of the links I came across and hope you see something that clicks:
