The document discusses the potential effects of Brexit on UK financial markets. It analyzes three main points: 1) GBP volatility using the VOLC function, noting increased volatility around key Brexit events. 2) FTSE100 performance, which may decrease due to trade barriers but be supported by a weak GBP and low commodities prices, with overall increased volatility. 3) Hedging risks using functions like OMON, FRD, and FXFM to monitor options, FX forwards, and rate forecasts to mitigate instability in British stocks, currency, and other financial markets due to uncertainty surrounding Brexit.

1. WHAT IS THE EFFECT OF BREXIT ON THE UK
FINANCIAL MARKETS?
Team Four, April 2016

2. Overview:
Introduction of Brexit
2
1. With Brexit, we mean the in-out referendum of the UK
membership of the EU
2. The vote will be officially held on June 23
3. Main reasons include:
• EU business rules
• Membership fees
• Control on borders

3. Overview:
Introduction of Brexit
3
We are going to take into consideration three main points:
• GBP Volatility
• FTSE100 Performance
• Hedging risk

4. GBP Volatility
Introduction
4
• One of the most relevant effects of Brexit in the market
• Analyse the implied volatility of EURGBP using the
function VOLC on the Bloomberg Terminal
• VOLC allows the comparison of volatility measures over
time, for up to 4 currency pairs

5. GBP Volatility
Function: VOLC
5
Scottish Referendum Cameron Speech on
EU Reform
First Official
Referendum Date
Announced

6. FTSE100 Performance
Brexit Effect on FTSE100 Performance
6
FTSE 100 stocks may decrease:
• Trade barriers with the EU
• Decrease in GDP will decrease UK-based companies’
revenues

7. FTSE100 Performance
Brexit Effect on FTSE100 Performance
7
However, impact could be limited by:
• Freedom to secure trade deals with big non-EU
countries
• Weak GBP: stimulates exports
• Low commodities prices: positive for manufacturing
companies

8. FTSE100 Performance
Brexit Effect on FTSE100 Performance
8
Regardless, volatility may keep increasing:
• Due to fear from the unknown
• Need for hedging risks

9. FTSE100 Performance
Function: VFTSE Index GP
9
Cameron Speech on
EU Reform
First Official
Referendum Date
Announced

10. Hedging risk
Risks
10
Financial Market Instability:
• British stock market (FTSE100)
• Currency

11. Hedging Risk
Function: Option Monitor (OMON)
11
• Provides real-time pricing, market data, and derived data for exchange-traded call
and put options for a selected underlying security in a customizable screen

12. Hedging Risk
Function: FX Forward Calculator (FRD)
12

13. Hedging Risk
Function: FX Rate Forecast Model (FXFM)
13

14. Thank you