Posts Tagged ‘ Derivatives ’
The Often-Forgotten Art and Science of Manager Due Diligence
Jan 10th, 2021 | Filed under: Due Diligence Process, Newly Added, Risk Management & OperationsBy Shana Sissel, CAIA – Chief Investment Officer of Spotlight Asset Group For almost two decades I have worked in roles that were heavily focused on investment manager due diligence across asset classes and legal structures. I began my career in due diligence-focused on the world of hedge funds. HedgeRead More
Restrictions on Pension Plan Investments: A Global Survey
Jul 16th, 2019 | Filed under: Derivatives, Newly Added, Institutional Investing, The A.I. Industry, Institutional Asset Management, Hedge Funds, Commodities, 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
Interest Rate Derivatives, Announcements and HFT: It’s All About Timing
May 23rd, 2019 | Filed under: Algorithmic and high-frequency trading, Newly Added, Credit Derivatives, The A.I. Industry, Structured Credit Products, Structured ProductsThree 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
A Proposed Model for VIX Derivatives Pricing
Feb 14th, 2019 | Filed under: Derivatives, Newly Added, The A.I. Industry, Commodities, Structured ProductsThe 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: Derivatives, Newly Added, Credit Derivatives, Economics, The A.I. Industry, Macroeconomics, Structured Products, Finance & EconomicsGiven 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: Derivatives, Newly Added, Credit Derivatives, Equity-linked Structured Products, The A.I. Industry, Structured Credit Products, Structured Products, Finance & EconomicsThree 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: Derivatives, Newly Added, Risk management, Credit Derivatives, The Global Economy & Currencies, Economics, The A.I. Industry, Institutional Asset Management, Risk Management Strategies & Processes, Hedge Funds, Commodities, Risk Management & OperationsA 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
Networks, Modeling, and Funds of Funds
Aug 8th, 2017 | Filed under: Financial Economics Theory, Newly Added, Alternative Investments in Context, The A.I. Industry, Finance & EconomicsTwo scholars affiliated with FERI Trust, a leading investment manager of the German-speaking countries of Europe, have written a study of hedge fund strategies that uses a “network-based analysis” thereof. The two authors, Eduard Baitinger and Thomas Maier, argue that hedge fund strategies show “numerous network-based properties” which help explainRead More
The State of the OTC Index Dividend Swap Market
Feb 9th, 2017 | Filed under: Derivatives, Newly Added, Equity-linked Structured Products, Structured Products, Risk Management & OperationsIn 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
Headline vs. Core Inflation: We Shouldn’t Have Laughed
Aug 4th, 2016 | Filed under: Investing in Commodities, Newly Added, Hedge Funds, Commodities, Structure of the Hedge Funds IndustryI’m old enough to remember the 1970s, and to remember the economic debates in the United States at the time concerning the inflation of that era. The U.S. left the Bretton Woods system near the start of the decade, thus ushering the “free float” of currencies against one another inRead More
The SEC: Still Fiddling with a 1940 Era Carburetor
May 3rd, 2016 | Filed under: Newly Added, Alternative Mutual Funds, Regulatory, Regulatory Environment, Liquid Alts, The A.I. Industry, Liquid Alternative Investiments, Other Topics in A.I.Steven A. Keen of Perkins Coie has posted an insightful discussion of section 18 of the Investment Company Act of 1940, and of the pending proposed regulation under that mandate, Rule 18f-4, on one of that firm’s blogs, the Derivatives & Repo Report. Both that proposal and Keen’s observations areRead More
Brexit and Derivatives: Allen & Overy’s Views
May 1st, 2016 | Filed under: Due Diligence Process, Newly Added, Regulatory Environment, The A.I. Industry, Risk Management & OperationsA decision by the United Kingdom to leave the European Union could be a bad thing for the derivatives markets. But from a legal standpoint there isn’t a lot that can be done about it in advance, and the existing Master Agreement for derivatives needs no change. Those are theRead More
A Fresh Look at Bubbles: Revising Assumptions
Sep 16th, 2015 | Filed under: CAPM / Alpha Theory, DerivativesIf 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
Usury Law: Not Too far From the Madden Crowd
Jul 7th, 2015 | Filed under: Derivatives, Regulatory, Legislation/Court rulingsNational 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
On First Looking Into SEC’s Homer: A Final Rule on Swaps Reporting
Feb 23rd, 2015 | Filed under: Derivatives, RegulatoryCommenters 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
How Not to Nationalize the Clearinghouses
Aug 17th, 2014 | Filed under: Derivatives, Risk management, InsolvencyLet'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
Basel/IOSCO ‘Near Final’ Proposal: Part Two
Mar 3rd, 2013 | Filed under: Derivatives, Regulatory, ForexThis is the second of a two-part discussion of a paper jointly issued by Basel and IOSCO on margin requirements for non-centrally cleared derivatives. The new paper solicits feedback on the phase-in timeline it proposes, a phase-in designed to provide flexibility so the affected markets can meet "operational and logistical challenges" by which they might otherwise be stymied. Read More
Basel/IOSCO ‘Near Final’ Proposal: Part One
Feb 28th, 2013 | Filed under: Derivatives, RegulatoryThis is the first of a two-part discussion of a paper jointly issued by Basel and IOSCO on margin requirements for non-centrally cleared derivatives. The new paper solicits feedback on only four still-open issues, and the list of issues itself illustrates the near finality they claim for this paper.Read More
Buy Side PMs Must Plan for Collateral Crunch
Dec 19th, 2012 | Filed under: DerivativesAs the reforms come on line, or as the asset management industry makes its adjustments in anticipation thereof, the initial margin requirements will be a big hurdle, in part because CCPs are quite restrictive about what assets are eligible as collateral. This may set the industry up for a collateral crunch. Read More
Malaysian Derivatives Trading and Investor Memories
Jun 25th, 2012 | Filed under: Derivatives, Alpha StrategiesIn a presentation about Malaysian derivatives trading, the issue of capital controls, and memories of the late 1990s, briefly came to the fore. Assume that a foreign investor considers Malaysia a promising place to invest. Will this investor be confident that if he does so he’ll be in a position to repatriate at his own choosing?Read More
Banks Aren’t Really Much Like Dominoes
Jun 20th, 2012 | Filed under: DerivativesAs a recent paper from four scholars at the Universidad de Santiago de Compostela, in Spain, observes, the extra flexibility risk managers gain from using credit derivatives comes with drawbacks. Perhaps the most obvious of drawbacks is that it creates counter-party risk. Still, the authors: Luis Otero González, Luis Ignacio Rodriguez Gil, Sara Cantorna Agra, and Pablo Durán Santomil, have written “Banking Risk and Credit Derivatives,” in order to take an empirical look at the balance of pros and cons. Read More
Credit Suisse: Making Fat Tails Work for You
Apr 25th, 2012 | Filed under: Derivatives, Alpha StrategiesThe new normal, on Thambiah’s and Foscari’s account, includes an enhanced role by central banks, implementing monetary policies through open market operations, closer interconnections of banking institutions worldwide, much painful deleveraging, and persistently high levels of unemployment. Read More
Looking for Abnormal Market Activity
Apr 3rd, 2012 | Filed under: Algorithmic and high-frequency trading, DerivativesCinnober has sold a customized form of its Scila Surveillance software -- a product designed to detect abnormal market behavior -- to the Qatar Exchange. One of the purposes of Scila Surveillance is the detection of harmful variants of algorithmic trading, such as the trading "snipers" who drive off market makers and reduce liquidity. Read More