Browsing: Structured Products

Structured Products

Bitcoin Derivatives Behaving Just Like Other Underlying Assets

Oct 15th, 2019 | Filed under: Newly Added, Derivatives, The A.I. Industry, The Global Economy & Currencies, Digital currencies, Other Issues in Private Investments, Risk Management Strategies & Processes, Frontier markets, Structured Products, Other Topics in A.I.

Bitcoin derivatives act a lot like the derivatives of other asset classes. Two scholars at the University of London recently looked at bitcoin’s “volatility smiles and skews” as found in the short and long dated maturity of options traded at the Deribit Exchange in 2019. Helyette Geman and Henry Price,Read More


Goldman Sachs Puts Stop-loss on Options

Oct 1st, 2019 | Filed under: Newly Added, The A.I. Industry, Risk management, Risk Management Strategies & Processes, Structured Products

Goldman Sachs threw in the towel two years ago. Well, “a towel,” anyway. Goldman has lots of towels. But two years ago, Goldman gave up on market making at the US options exchanges. In time for the anniversary, Alphacution has posted a research paper on the “long arc” of optionsRead More


Four Lessons from the Sale of Refinitiv

Aug 12th, 2019 | Filed under: Newly Added, The A.I. Industry, Other Issues in Private Investments, Structured Products

Less than a year ago, Thomson Reuters sold a majority interest in its financial and risk product portfolio, a critical part of that corporate domain, to a consortium led by Blackstone, in a deal that valued the assets, now renamed “Refinitiv,” at $20 billion. In April of this year, thatRead More


Restrictions on Pension Plan Investments: A Global Survey

Jul 16th, 2019 | Filed under: Newly Added, Derivatives, The A.I. Industry, Institutional Investing, Hedge Funds, Commodities, Institutional Asset Management, Structured Products, Allocating to A.I.

A new report from the Organization for Economic Cooperation and Development surveys the main quantitative investment restrictions to which pension funds and other pension providers are subject in both OECD countries and a selection of International Organization of Pension Supervisors’ (IOPS) member countries. It reminds us of the general desireRead More


The Value of Speculation Limits, or Lack Thereof

Jun 18th, 2019 | Filed under: Newly Added, Commodities, Derivatives, The A.I. Industry, Commodity Forward Pricing, Commodities

CFTC Commissioner Daniel Berkovitz recently spoke to the FIA Commodities Symposium, in Houston, Texas, about the reduction of systemic risks and the strengthening of market integrity under the Dodd-Frank Act. He gave the usual disclaimer, that the views he expressed in this address were his own not those of theRead More


Trade Tensions, Tariffs and European Volatility

May 30th, 2019 | Filed under: Newly Added, Derivatives, The A.I. Industry, The Global Economy & Currencies, Business News, Economics, Macroeconomics, Finance & Economics

By Mark Shore As the discussions of trade wars and tariffs persisted throughout 2018 and into 2019, it may have influenced a sense of uncertainty in the global financial and commodity markets as companies might have to rethink their supply chains and manage potential disruptions and at least in theRead More


Interest Rate Derivatives, Announcements and HFT: It’s All About Timing

May 23rd, 2019 | Filed under: Newly Added, Algorithmic and high-frequency trading, The A.I. Industry, Credit Derivatives, Structured Credit Products, Structured Products

Three scholars associated with the University of Wollogong, Australia, recently published a paper on the contribution of high-frequency traders to the absorption of new information by the markets, especially in relation to the prices of interest rate derivatives. The study is the work of Alex Frino, Michael Garcia, and IvyRead More


Caveat Emptor: Leveraged Loans and the Credit Cycle

May 19th, 2019 | Filed under: Newly Added, The A.I. Industry, Debt Types of Private Equity, Hedge Funds, Credit Derivatives, Private Investments, Structured Products

AllianceBernstein, the Nashville-based, asset management firm released a white paper on high-yield bank loans. Buying these loans seems, to some investors, a fix for the ongoing low-interest-rate environment. But the white paper is a warning. In two words, “buyer beware.”  The paper is the work of Douglas J. Peebles andRead More


Corporate Distress and Its Derivatives

Mar 31st, 2019 | Filed under: Newly Added, Derivatives, The A.I. Industry, CDO Structuring and Credit RIsk, Hedge Funds, Event-Driven Hedge Funds, Credit Derivatives, Structured Credit Products, Structured Products

Henry T.C. Hu, of the University of Texas at Austin, School of Law, has written an article on the “information asymmetries” that are associated with corporations that are in financial distress, but not under bankruptcy court protection. It is an article that sends us back to the Christmas selling seasonRead More


A Proposed Model for VIX Derivatives Pricing

Feb 14th, 2019 | Filed under: Newly Added, Derivatives, The A.I. Industry, Commodities, Structured Products

The VIX may be about to get some competition. VIX is the “fear gauge,” the very visible measure of expected price fluctuations in the S&P 500 index options. On the foundation of its popularity, CBOE has built a monopoly on exchange-traded volatility products. VIX derivatives have become among the mostRead More


Can LIBOR Be Replaced?

Feb 12th, 2019 | Filed under: Newly Added, Derivatives, The A.I. Industry, Credit Derivatives, Economics, Macroeconomics, Structured Products, Finance & Economics

Given a long wave of scandals that lasted from 2008 until 2012, most of the derivatives industry, and most of its regulators, have agreed that the London Interbank Offered rate [Libor] ought to be replaced by a more tamper-resistant mechanism. Surely there must be an index that will measure theRead More


CEOs and the effect of education on use of convertible bonds

Nov 29th, 2018 | Filed under: Newly Added, Derivatives, The A.I. Industry, Credit Derivatives, Equity-linked Structured Products, Structured Credit Products, Structured Products, Finance & Economics

Three scholars affiliated with the University of Manchester have  published a paper that reaches a striking view of corporate leadership and the decision to issue convertible bonds. Cynics have long suspected that Wall Street smart-alecks have roped the executives of corporations into issuing instruments that are contrary to the bestRead More


Hedging or Trading? Why Italian Banks Use Derivatives

Aug 23rd, 2018 | Filed under: Newly Added, Derivatives, The A.I. Industry, Risk management, Hedge Funds, Credit Derivatives, The Global Economy & Currencies, Commodities, Economics, Institutional Asset Management, Risk Management Strategies & Processes, Risk Management & Operations

A recent report by the Bank of Italy looks at why the various banks of Italy use derivatives. Specifically, the central bank of that country wanted to know: is it a matter of hedging? Or is it a matter of keeping a proprietary book? Hedge fund managers and other pursuersRead More


The Irrelevance of Dodd-Frank & Memories of the Crisis

May 28th, 2018 | Filed under: Newly Added, Credit Derivatives, Risk Management Strategies & Processes, Structured Credit Products, Structured Products, Risk Management & Operations

There has been some political excitement of late concerning the repeal of part of the Dodd-Frank statute, which was the great post-crisis reform bill that sought to remake the financial regulatory system in the United States. On Thursday, May 24, President Trump signed a bill that exempts dozens of banksRead More


WisdomTree on the Success of its Rate-Hedge Agg Suite

Apr 26th, 2018 | Filed under: Newly Added, Structured Credit Products, Structured Products

The path to higher rates has not been a smooth one, but interest rates in the United States are now higher than they have been since the global financial crisis and they may well become higher than they are now. What should traders or investors do about this? How toRead More


Barnes on Swaps Transparency under  MiFID II

Sep 19th, 2017 | Filed under: Newly Added, Investing in Commodities, Operations, Commodities, Structured Products, Risk Management & Operations

A recent blog in the TABB Forum, by Chris Barnes of Clarus Financial Technology, looks at recent developments in the realm of MiFID, and looks forward. The UK’s Financial Conduct Authority in August of this year authorized certain Approved Publication Arrangements (APAs) for reporting under MiFID II.  The authorization ofRead More


New Numbers on Catastrophe Bond Insurance

Jun 27th, 2017 | Filed under: Newly Added, Risk management, Structured Products, Risk Management & Operations

A new report from an Alternative Risk Transfer research service, Artemis, looks at the catastrophe bond and insurance-linked securities market in the (recor- breaking) first quarter of 2017. Bond and ILS issuance reached the unprecedented level of $2.76 billion this Q1. That involved 25 tranches of notes from 14 deals,Read More


The State of the OTC Index Dividend Swap Market

Feb 9th, 2017 | Filed under: Newly Added, Derivatives, Equity-linked Structured Products, Structured Products, Risk Management & Operations

In a new article in the Journal of Alternative Investments, Scott Mixon and Esen Onur quantify the over the counter index dividend swap market. Along the way, they provide a good example of the scientific method: positing a relationship, testing it against the data, and then abandoning it when theRead More


The Return Characteristics of Gold Mining Stocks

Jan 3rd, 2017 | Filed under: Newly Added, Investing in Commodities, Commodities, Equity-linked Structured Products, Commodities: Examples, Gold, Structured Products

Two Maryland-based scholars have reviewed the evidence of the performance of gold mining stocks. The title of their article, which appears in the Alternative Investment Analyst Review, November 2016, puts the central question bluntly: are such stocks “more like gold or like stocks”? Let’s get the answer to that queryRead More


Sovereign Credit Swaps: Europe’s Sovereigns and Regime Changes

Aug 16th, 2016 | Filed under: Newly Added, The A.I. Industry, Asset allocation, Regulatory Environment, Credit Derivatives, Asset Allocation Models, Structured Credit Products, Structured Products, Allocating to A.I.

Andrea Consiglio and two of his colleagues have developed models for the management of risk in the sovereign credit swaps market, and they have successfully back tested these models against recent European history. Consiglio is a professor at the University of Palermo, in Italy. Sovereign CDS’ are contracts that offerRead More


A Short History of Life Settlements

Jan 27th, 2016 | Filed under: Newly Added, Structured Products

Andrew N. Smith, CAIA, interviews Doug Himmel of Melville Capital and Adam Meltzer of Vida Capital, both experts in the life settlement industry. Andrew: The reason why we’re getting together today is to talk about the life settlement market. Not a lot of people know about life settlements. So, with thatRead More


After Seven Years: Philosophical Implications of the Madoff Fraud

Dec 30th, 2015 | Filed under: Newly Added, Derivatives, Due Diligence Process, Operations, Equity-linked Structured Products, Personalities in AI, Risk Management & Operations

It has been seven years and a few days more now since Bernard Madoff acknowledged to authorities that “there is no innocent explanation” for the story they had just heard from his sons. It has been 15 and a half years since Harry Markopoulos ran the numbers regarding Madoff’s performanceRead More


A Fresh Look at Bubbles: Revising Assumptions

Sep 16th, 2015 | Filed under: CAPM / Alpha Theory, Derivatives

If it is possible for bubbles to arise in frictionless circumstances, then it follows that any theory that treats bubbles as the consequence of friction is, at very best, incomplete. And that is important to know especially if policy makers are busy drawing their own conclusions from those incomplete-or-worse theories. Read More


The LIBOR Fixing Scandal Gets a Conviction and a Book

Aug 9th, 2015 | Filed under: Currencies, Derivatives, Forex

When it all hit the fan, U.S. investigators in particular (the Brits somewhat less so) came to see Hayes as a mastermind behind its digestive generation. But Arvedlund seeks in her new book on the Libor Rigging scandal to place the role Hayes played in context. Read More


Overtrading and the Danger of Pro Rata

Jul 30th, 2015 | Filed under: Commodities, Algorithmic and high-frequency trading, Currencies, Derivatives, Forex

Guest columnist Ginger Szala looks at pro rata and what happens if...Read More


Usury Law: Not Too far From the Madden Crowd

Jul 7th, 2015 | Filed under: Derivatives, Regulatory, Legislation/Court rulings

National and international markets have long been accustomed to the fact that various states in the United States have their own usury laws. Still, litigation in the 2d Circuit, arising out of New York, may have a substantial impact on credit markets and their derivatives. Read More


Bitcoin and Kin: The View from Europe

Jul 1st, 2015 | Filed under: Currencies, Derivatives, Digital currencies

Bitcoin's price charts nowadays seem to have settled into an equilibrium between $240 and $220 per. But ESMA, and the authorities in Sweden, are both paying attention. Read More


Vindication for Pirrong and Irwin: Why Are Trafigura’s Profits Up?

Jun 22nd, 2015 | Filed under: Media Coverage of Hedge Funds, Commodities, Derivatives, Indexes

Trafigura has done quite well from the decline in crude oil prices in recent months. So well, in fact, as to throw a harsh light on a story that appeared in The New York Times in December 2013. Read More


Spoofing: The ‘It’ Enforcement Action

Jun 17th, 2015 | Filed under: Algorithmic and high-frequency trading, Hedge Fund Strategies, Derivatives, Regulatory, Technology

Spoofing is probably about as ubiquitous as texting-while-driving. And it is possible to make an example of a spoofer caught red-handed. But it isn't clear what purpose that will serve. The real problem is that a broken market contains a broken set of incentives. Read More


A Close Look at the Deutsche Bank Findings

Jun 10th, 2015 | Filed under: Derivatives, Risk management

Judy Collins might suggest looking at risk from ‘both sides now.’ But it appears that according to DB at a critical moment in global financial history, risk existed only to the extent that it worked to enhance the value of DB positions: it didn’t exist in any sense that might have required a haircut.Read More


Comparing SPM to Elliott: And Other Thoughts on MBS Funds

May 6th, 2015 | Filed under: Derivatives, Alpha Hunters, Risk management, Alpha Seekers

SPM "sticks out in [his] mind" as a successful manager with a "17 year track record" with returns in the mid 20s. "Where else are you going to get that?" Well, there is at least one other place that then comes to Brian Shapiro's thoughts: SPM's return compares to the return available from Elliott.Read More


Tavakoli on Death, an Industry’s Culture, and Decisions

Apr 29th, 2015 | Filed under: Derivatives, Risk management

Bill Broeksmit, with whom Tavakoli worked closely at the interest-rate swaps desk at Merrill Lynch in the late 1980s, killed himself in January 2014. The manner of this death, and the circumstances surrounding it, give this book even more gravitas than would a global financial crisis or two. Read More


Authorities Offer Revisionism About Flash Crash

Apr 22nd, 2015 | Filed under: Algorithmic and high-frequency trading, Derivatives, Indexes

Authorities now claim that the shenanigans that set off the flash crash of May 2010 were the work of Navinder Singh Sarao. Does this mean Waddell & Reed were unjustly maligned? Almost certainly. Read More


Eurelectric Speaks Up For Grushenka

Apr 16th, 2015 | Filed under: Derivatives, Risk management, Regulatory

Is it possible or desirable to separate "speculation" from operational hedging, so as to clear the way for industries to do the latter without the regulatory burdens that planners want to impose upon the former? Once Europe has decided that speculation is a bad thing, won't it end up pursuing the demon ways that will collapse the proposed distinction? Read More


Liquidity, Leverage and Those Nimble Hedge Funds

Apr 9th, 2015 | Filed under: Hedge Fund Strategies, Derivatives, Risk management, Regulatory

Basel III has given us three different statistics with a common goal, to keep banks to a stable funding profile, neither too illiquid nor too highly leveraged. As these requirements come on-line, what will be the consequences for the relationship between prime brokers and hedge fund managers? Read More


A Taylor-Swift Lawsuit: ‘I’ve Got a Blank Space Baby.’

Mar 26th, 2015 | Filed under: Algorithmic and high-frequency trading, Hedge Fund Strategies, Derivatives, Technology

This is the story of one high-frequency trading firm suing one or more others and giving detailed credence to everything that has been said over the last year or so by those who bemoan the rise of HFT firms. Read More


Intraday Momentum Confirmed: Day Traders Credited

Mar 24th, 2015 | Filed under: CAPM / Alpha Theory, Derivatives, Behavioral finance, ETFs

The first half-hour return of the S&P 500 ETF predicts the last half-hour return of the same trading day rather well. Why isn't this effect arbitraged away and a random walk restored? Read More


Most Investors Sanguine About Central Clearing Mandates

Mar 22nd, 2015 | Filed under: Hedge Fund Industry Trends, Derivatives, Regulatory

The international push to mandate central clearing has expanded the clearinghouses "well beyond levels the market has ever seen," Greenwich Associates reminds us in a new report. This is an experiment, and there remains some grounds for uncertainty about the outcome. Read More


On First Looking Into SEC’s Homer: A Final Rule on Swaps Reporting

Feb 23rd, 2015 | Filed under: Derivatives, Regulatory

Commenters successful pressed for certain changes in this massive new rule during its years of gestation. For example, the rule incorporates a T + 24 approach for the reporting of block trades. But warned, though, blizzards in NYC don't stop the ticking of that 24 hour clock. Read More


A Basis for Pursuing the Pursuers? Sonar-based Whale Hunts

Feb 17th, 2015 | Filed under: Algorithmic and high-frequency trading, Derivatives, Institutional Investing, Alpha Hunters, Regulatory

To the extent that high-frequency trading is analogized to 'insider trading,' it may be in trouble with securities regulators but still in the clear with commodities regulators. After all, the latter do allow hedgers to use non-public material information to protect themselves. But Gregory Scopino doesn't believe pinging and related HFT practices should be in the clear with the CFTC at all. Read More


The SEC Takes a Limited View of Janus’ Limited View

Dec 29th, 2014 | Filed under: Derivatives, Regulatory, Legislation/Court rulings

A December 15 opinion by the SEC limits the significance of a Supreme Court decision of three years ago, and so at least pending appeal it broadens the applicability of the basic anti-fraud rule 10b-5 to the employees of an investment adviser. Read More


Capital Markets, Derivatives and the Law

Nov 23rd, 2014 | Filed under: Derivatives, Legislation/Court rulings

Alan Rechtschaffen quotes two definitions of "moral hazard" in this book. The first, from Ben Bernanke, seems to get the book off to a rather awkward start. The second, from Zachary Gubler much later on, represents something of a recovery. Read More


Is Liability Insurance an Estate Asset in Bankruptcy?

Sep 16th, 2014 | Filed under: Derivatives, Insolvency, Legislation/Court rulings

The Manhattan bankruptcy court has now granted individual defendants in the MF Global matter, including Jon Corzine, access to funds from their D&O insurance. But it wasn't easy for them to get here, and therein lies our moral. Read More


SEC Adopts Changes to Regulation AB: More Transparency

Sep 3rd, 2014 | Filed under: Derivatives, Regulatory

The SEC's new rules for asset backed securities require asset level disclosures both at the time of offering and later, on an ongoing basis. The disclosures are required to appear in a standardized XML format.Read More


Clearing Obligation: ESMA Releases CP Comments

Aug 26th, 2014 | Filed under: Derivatives, Regulatory

The clearing-for-everything parade continues. Christopher Faille reviews three representative comments among those just released by ESMA, elicited by its consultation paper on the new clearing obligation for interest-rate swaps. Read More


How Not to Nationalize the Clearinghouses

Aug 17th, 2014 | Filed under: Derivatives, Risk management, Insolvency

Let's not make clearinghouses too big to fail. Or if, through, Dodd-Frank, we already have, let's turn back and reconsider that decision. That's how not to end up bailing them out or nationalizing them in due course. Read More


Eurex Clearing and DB Group: New Paper on CCPs

Jul 29th, 2014 | Filed under: Derivatives, Risk management, Regulatory

If such institutions as the ECB keep rewarding indebtedness, then over time they get their way. They'll get a lot of deal making, even if it amounts to a frenzy. Then investors will demand funds that play to that frenzy. Read More


Winner Takes All, and Liquidity Takers Win

Jul 22nd, 2014 | Filed under: CAPM / Alpha Theory, Algorithmic and high-frequency trading, Derivatives

It does appear that speed is helpful in generating alpha. How is it helpful? Here there are two views, and the less HFT-friendly of these views has received some scholarly/empirical support. Read More


Does a Firm Insist on Historical Cost Accounting? Short!

Jun 23rd, 2014 | Filed under: Derivatives, Alpha Strategies

"Isn't there anything good to be said for the practice of historical cost accounting, especially when the cost figures are higher than the mark-to-market figures? Well ... no. It's reality avoidance."Read More


MiFID Implementation Consultation: A Rocky Start

May 28th, 2014 | Filed under: Algorithmic and high-frequency trading, Derivatives, Regulatory

ESMA defines HFT as “a special class of algorithmic trading in which computers make decisions to initiate orders based on information that is received electronically, before human traders are capable of processing the information they observe and of taking a decision in relation thereto.” It then decides that needs further definition.Read More