Natural gas producers in the US are faced with tough choices. Advances in drilling technology have made low cost production from shale resources viable on a large scale, and the industry has been in a race to lay claim to the most valuable properties and to capture a competitive advantage in mastering the technology. But [...]
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 [...]
November 14, 2011 – 4:34 am
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 its suppliers of specialty pipes and ducts, which became victim of the European credit crunch. With banks sharply deleveraging, even to suppliers [...]
October 11, 2011 – 3:46 am
Hecla Mining Co. is copying Newmont’s strategy. It announced last month that its dividend will be linked to the price of silver: All dividends, including those in the third quarter, would increase or decrease by $0.01 per share for each $5.00 per ounce incremental increase or decrease in the average realized silver price in the [...]
October 4, 2011 – 2:50 am
Earlier this year, the Newmont Mining Corporation announced that future dividend payouts would be linked to the price of gold. For every $100 increase in the average price received on its sales of gold, the annual dividend would be increased by 20¢ a share. From the Newmont deck: What does the promise of a gold-linked [...]
September 19, 2011 – 6:59 am
The corporate finance practice team at McKinsey & Co has joined the long line of people looking at the large cash hoard being assembled by corporations and asking “why?”. In an article in the McKinsey Quarterly, they suggest a surprising answer: One factor that might go unnoticed, however, is the surprisingly strong role of decision [...]
September 5, 2011 – 11:01 pm
We began this series of posts recapping the finding that a currency carry trade investment has historically produced high return relative to the low risk. This finding is not consistent with models in finance that focus on the correlation between an investment’s return and the return on some benchmark stock portfolio. Using these models, and [...]
August 29, 2011 – 11:01 pm
In our previous post in this series, we highlighted a line of research by Burnside et al. that explains the profitability of the carry trade as a “peso” problem. That is, the historical data doesn’t completely reflect all of the bad outcomes that may arise. The as yet unobserved bad outcomes are known as “peso [...]
August 28, 2011 – 11:01 pm
In a previous post, we reported on the evidence that the carry trade strategy – investing in currencies with high interest rates and borrowing in currencies with low interest rates – earns high returns with low risk. In this post we describe in more detail some of what is known about the risk and return [...]
