Monthly Archives: February 2012

Can Hedging Save Greece?

February 23, 2012 – 8:18 am

As a part of its restructuring of debt, the Greek government has decided to issue GDP-linked securities: Each participating holder will also receive detachable GDP-linked Securities of the Republic with a notional amount equal to the face amount of the New Bonds of the Republic issued to that participating holder. The GDP-linked Securities will provide [...]

By John Parsons | Posted in credit risk, debt/liabilities, financial innovation, financial policy, hedging | Comments (0)

The True Cost of Government Guarantees — Take 2

February 17, 2012 – 8:25 am

As part of the fallout from last August’s bankruptcy of the Federally-backed solar firm Solyndra, the Obama Administration appointed Herbert Allison, a Republican banker and former Treasury official to review the Department of Energy’s loan guarantee program. His report was completed at the end of January and released earlier this week. It contains many useful [...]

By John Parsons | Posted in hedging, insurance, pricing risk | Comments (0)

Hedging by Racing Cash Out

February 13, 2012 – 9:45 am

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 sweep all of our cash raised during the day out of the local banks and send it to banks here in the U.K. which [...]

By Antonio Mello | Posted in cash balances, credit risk, markets, systemic risk | Comments (2)

Credit Suisse note is not a solution to bonus culture

February 9, 2012 – 1:49 am

Credit Suisse (CS) has announced it will pay a portion of its bankers’ bonuses with a structured note instead of cash. The note pays a fixed coupon of around 6% per year, and is backed by a package of derivative contracts currently in the balance sheet of CS. Since the value of the portfolio is [...]

By John Parsons & Antonio Mello | Posted in governance, incentives, speculation | Comments (0)

The Value in Futures

February 3, 2012 – 7:58 am

Today’s Wall Street Journal has a piece by Ian Berry about the possible restructuring of the CME’s rice futures contract. The design of the contract determines how effectively “farmers, elevator operators and beer brewers” can use the contract to do their hedging. The article is about problems that have shown in up in recent times [...]

By John Parsons | Posted in commodities, financial innovation, financial policy, hedging, markets | Comments (0)
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