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 [...]
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 [...]
October 25, 2011 – 4:34 pm
The promise We saw two recent commentaries by eminent economists advocating the use of indexed debt instruments. Ken Rogoff, of Harvard’s Economics Department, was interviewed in the McKinsey Quarterly about the current Great Recession and what can be done about it. Among a number of other points about long-run structural reforms, he says that: And [...]
October 18, 2011 – 1:39 pm
Brokers dealers and investment banks get a substantial amount of their funding from the repo market. In a typical repo, party #1 (the borrower) gets funds from selling securities to party #2 (the lender); when the repo matures the transaction is reversed: party #1 repurchases the securities by paying party #2 the initial funds plus [...]
In the upcoming years, European telecoms need to issue an average of €30 billion in bonds. But financial market instability suggests that even highly credit-worthy companies may have trouble gaining access to funds. Liquidity risk management once again became a pillar of corporate financial policy following the Lehman collapse in 2008. It involves a continuous [...]
February 8, 2011 – 7:27 am
The Great Financial Crisis and the role played by certain financial innovations, such as credit default swaps and synthetic securities has made a number of people question the value of financial innovation. A premise of our risk management course is that financial innovation is valuable, both to the individual company and to society at large. [...]
January 2, 2011 – 3:09 pm
There is a paper by Brian Henderson and Neil Pearson soon to be published in the Journal of Financial Economics (pre-publication working paper is available for free here) that documents significant overpricing of a complicated structured equity product marketed by investment banks to retail customers. The authors evaluate a set of SPARQS created by Morgan [...]
November 18, 2010 – 2:41 pm
General Motors sold more than $20 billion in stock yesterday, the largest IPO ever. The sale is a milestone in the US government’s takeover of GM and Chrysler. Of course, success has many parents, so there is a small debate about who and what is the cause for the, so far, success of the turnaround [...]
