​Gap Risk Drives Unappealing Risk-Reward In Selling Credit Vol

Despite recommendations from some sellside strategists to sell credit volatility in both short-term and long-term maturities, the risk-reward of such strategies are being viewed as unappealing to portfolio managers due to gap risk as the European Central Bank policy meeting and the Federal Open Market Committee meeting grow nearer. This is despite Main and particularly Xover volatilities appearing expensive amid a period of tightening in credit indices in recent days.