the alpha and omega : excerpts

OTC Derivatives Clearing Technology

Mahalanobis — 2011-10-05T09:38:00Z

OTC Derivatives Clearing Technology: Bringing the Back Office to the Forefront (pdf), TABB Group (Summary)

related items:
Tech...

Oops :: Basel Risk Weights

Mahalanobis — 2011-09-26T08:20:00Z

Businessweek writes:

The risk-weighting system is far too complex and too easily manipulated to provide a reliable picture of how much capital a bank really has. For a large bank such as JPMorgan, coming up with a risk-weighted ratio requires sorting assets into more than 200,000 different buckets. Even unintentional...

Inflation Expectations

Mahalanobis — 2011-06-29T09:30:00Z

Bloomberg: Morgan Stanley was burned by a wager on U.S. inflation expectations in the second quarter, three people informed of the dealings said.

Traders at the bank bet that inflation expectations for the next five years would rise in Treasury markets, while forecasts for the next 30 years would fall, according to two of the people. Such wagers on so-called breakeven rates involve paired purchases and short sales of Treasuries and Treasury Inflation Protected...

Unemployment Statistics

Mahalanobis — 2011-06-10T14:07:00Z

FT: [The size of the Spanish black economy] helps to explain one of the more embarrassing economic mysteries of modern Spanish society: an extraordinarily high rate of official unemployment without much of the civil unrest and popular anger that such a problem would normally generate. If it were true that 4.9m people, or more than 21 per cent of the workforce, were jobless, Spain would not be as peaceful as, barring a few demonstrations, it has so far been, say economists and business...

A different way to look at probability distributions

Mahalanobis — 2011-05-26T15:19:00Z

A different way to view probability distributions, Probability and Statistics Blog

Imported Inflation : Energy Prices

Mahalanobis — 2011-04-22T10:40:00Z

For central banks it poses a big problem when inflation is not "home made" but imported through higher energy prices. In this case inflation is not the result of a booming domestic economy but of external factors (political turmoil, peak oil, ...). Interest rate hiking be the central bank would be pretty ineffective except when it leads to a strengthening of the home currency.

Thanks to the ECB statistical Data...

The New Fear Barometer (?)

Mahalanobis — 2011-04-06T08:57:00Z

There has been some talk about the high level of the Credit Suisse Fear Barometer lately (e.g. SurlyTrader).

Bloomberg: The CS Fear Barometer measures investor sentiment for 3-month investment horizons by pricing a zero-cost collar. The collar is implemented by the selling of a 10% OTM SPX call option and using...

Speculative Grade

Mahalanobis — 2011-03-09T19:26:00Z

FT: Junk bonds, the darling of the debt markets for two years, are proving remarkably resilient.

Globally, triple C-rated companies, which include names such as J Crew, the clothing chain, and Level 3, the communications...

Vasicek asymptotic single factor model ("Gaussian Copula")

Mahalanobis — 2011-03-03T14:00:00Z

This post explains the Vasicek/Merton single factor model which is part of the Basel framework (IRB approach) and has been used to evaluate CDOs.

Imagine you loan money to a friend who will default with a probability of 1%. When it comes to paying back the loan you will either receive 100% (plus any interest) or 0%. That's pretty risky. So you figure you can improve your situation by making same size loans to n friends. (NB: You will need a license for doing so). In...

EUR Greece Sov Curve :: 3D

Mahalanobis — 2011-02-25T17:59:00Z

Aging Population :: Banks vs Insurance Companies

Mahalanobis — 2011-02-24T19:20:00Z

Oliver Wyman:

As the population ages, the demand for financial products will change. Broadly speaking, older consumers are wealthier than younger ones. They have greater balances in savings and investment accounts and are much more likely to live in an un-mortgaged home. As they reach retirement, their demand for accumulation products, such as equity mutual funds and amortizing mortgages (designed to accumulate home equity), declines markedly from their peak accumulation years....

Greece :: Negative Basis Trade

Mahalanobis — 2011-02-24T12:19:00Z

CDS Curve (white line) vs. Z-Spread (+)

Read: Citi...

High-frequency Trading :: Impact Analysis

Mahalanobis — 2011-02-23T12:17:00Z

Deutsche Bank Research: Existing evidence related to the impact of HFT on certain market quality and efficiency indicators is inconclusive. Some studies (e.g. Hendershott and Riordan, 2009; Jovanovic and Menkveld, 2010) suggest that HFT using market making and arbitrage strategies has added...

Economic Theory Bashing : 1942 Style

Mahalanobis — 2011-02-22T11:57:00Z

Theory has, at length, become so "scientific" and abstract as to intrigue the mathematicians who have taken delight in developing the concept of a kaleidoscopic and frictionless play of atomistic units in a complex and eternally unfolding equilibrium. The notion of equilibrium suggested equations; equations are prolific parents of their kind; and the game has gone on until the pages of the more esoteric economic journals have become a mass of hieroglyphics intelligible...

Active vs. Passive Management

Mahalanobis — 2011-02-21T18:16:00Z

Financial News: Investment consultants are pushing for a seismic shift from active asset management to passive in a move that could result in savings of more than $50bn a year for pension schemes and other institutional investors and a switch of trillions of dollars in assets.

The advice is based on consultants growing belief that some markets, including the US and UK equity markets, have become so efficient...