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It’s not all about end-users.
The US Chamber of Commerce is hosting a “fly-in” of corporate representatives tomorrow to lobby Congress and regulators on derivatives reform. They are advocating for a House bill (H.R. 1610) that...
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Manufacturers as Banks
EADS, the European aerospace group and owner of the Airbus family of jetliners is busy redesigning its boundaries to become a banker of last resort. The company recently bought PFW Aerospace, one of...
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Eyes on the prize in financial reform #1: the Volcker Rule
The Financial Times’ Tracy Alloway has a nice piece that crystallizes concerns circulating among many observers regarding reforms to the banking system. New rules designed to increase the safety of the...
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Hedging by Racing Cash Out
Speaking at GlaxoSmithKline’s annual results presentation last week, CEO Andrew Witty disclosed some of the strategies the company is employing to manage the risk posed by the Eurozone debt crisis: We...
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CVA Lessons: Is it better to charge or to subsidize credit risk?
One often hears that competition promotes the efficient and weeds out the inefficient. Yes, but only insofar as there is a level playing field. Give special privileges to certain players, and the best...
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Deleveraging and the creation of the Eurozone Keiretsu
Many Eurozone banks are going through huge deleveraging: they are selling their portfolios of loans to hedge funds, reducing and cutting revolvers to corporations, and shortening the overall maturity...
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Turn a Blind Eye to Credit Risk?
When a bank makes a loan to a business it assumes some risk that the loan will go bad. Regulators, when they do their job, demand that the bank estimate that risk and hold capital against it. That’s...
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It never hurts to check the data
This coming Friday the CFTC will be hosting a Research Conference on derivatives markets. The agenda touches on HFT, swaps market structure and the financialization of commodities. The paper by Michael...
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Hiding Risk by Netting Exposures
Which representation of a bank’s derivative portfolio provides a fairer picture of the risk it presents, the net or gross balances? US banks, operating under US Generally Accepted Accounting...
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How large is the taxpayer subsidy to Too-Big-To-Fail banks?
The issue came up yesterday when Fed Chairman Ben Bernanke testified before the Senate Banking Committee. Senator Elizabeth Warren cited a Bloomberg report that put the number at $83 billion to the 10...
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The Value of Clearing Derivatives
What are the costs and benefits of the reform of derivative markets now taking place? A report released last week by the Bank for International Settlements (BIS) pegged the central estimate of the...
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Never give information to the enemy.
Douwe Miedema of Reuters covered yesterday’s meeting of the CFTC’s Technology Advisory Committee and reports that: The U.S. derivatives watchdog on Monday chided the industry for providing gappy data...
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It takes 2 to tango, and 3 to intermediate.
The Wall Street Journal ran a story last week about Citigroup and Deutsche losing money on the oil hedge they sold to Mexico. The article talks of a loss totaling $5 million on a put sold for a premium...
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