The world financial market where already under pressure from the Euro crisis, untill yesterday late night when the news broke out JPMorgan has trading loss of at least $2 bln, reputation hit . The CIO unit is where Bruno Iksil was making $200 billion-sized bets. Basically JPM has suffered massive losses at its CIO group most likely due to its IG/HY positions held by Iksil.
Below quotes from Mr Jamie Dimon
- “…Errors, sloppiness, and bad judgement.”
- “Bad strategy, badly executed and poorly monitored”
- “It could get worse. This could go on for a little bit.”
- “Badly executed, badly monitored. I’m not going to repeat it 800 times” View full article »
As I am trying to communicate from my last post that the market for OTC derivatives is mammoth in size. I have tried to put my views in my past articles over OTC.Derivatives Central Clearning & Dodd – Frank .Central Clearning Of derivatives & Dodd – Frank continues… , Credit derivatives Cat bonds & Cat Swaps ,OTC derivative series CDS, Bonds and Basis Trade
I got the opportunity to read one of the recent paper on Reforming the OTC derivatives market by William C Dudley .
Dudley believes the pre-crisis OTC derivatives market needed reform. Let’e examine his case. View full article »
Continuing from my yesterday’s post why Central clearing is one of the solution if we just analyse recent crisis.In the financial crisis of 2008, banks feared that their trading partners might not be able to meet obligations to make good on the credit-default swaps,and on derivatives plus other financial arrangements. The situation set off a chain reaction that paralyzed global markets until governments and central banks provided enormous financial support.
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Ready or Not ? Here it comes
Lot of Hedge funds and Investment banks have started publishing the margin FAQ’s after the Credit crisis. As part of Dodd-Frank, by the end of 2012, all standardised over-the-counter derivatives will have to be cleared through central counterparties.
That’s the biggest challenge for the market as OTC derivatives account for almost 95% of the derivatives markets. In June 2011, the notional value of outstanding OTC derivatives was around $707 trillion or €540 trillion. View full article »
The way derivatives have evolved over the years they attracted criticism along with the praise.Corporates continues to take advantage of leverage with them many went belly up and some made fortunes out of them.
Here are some of the Jargons these days the firms uses :
- Diversification : Lets do several things that we don’t know any thing about badly
- Sticking to the knitting or Focus : Lets get back to doing what we once did if any body can remember what it is and how it is to do it
I am a big fan of Traders Guns and Money the book written by Satyajit Das, the definitions Knowns and Unknowns revealed by him is the classic work. The reality is always to make sure that you have a sheat when the music in this game of musical chairs for high stakes stops ( referring to the examples for the crisis happened in the past). As a result of it some interesting statements the management of the firms make but the intensity is something to thought about :-
Statement: As a Leading dealer with a global platform, we are the major player in the market.
- Translation: We have spent a fortune to build this business and are now prepared to spend millions more subsidizing your requirements.
Statement: We have one of the most talented teams in this space.
- Translation: Our staff are vastly overpaid and on huge guaranteed bonuses.
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This weekend financial media was concentrating on the credit event of Greece.Greece has officially defaulted on its debt to private lenders. It was an “orderly” default, negotiated rather than simply announced. This formal default on about $100 billion triggered payment of $3 billion in credit-default swaps.
One of the washington post tried to revealed that Insurance and CDS are different, CDS should never be treated like insurance, as its Mandatory for the insurance company to make reserve against insurance that it has issued on the other hand Credit Default swaps (CDS) is naked gambling. View full article »
International Swaps and Derivatives Association is the body corporate to make over the counter (OTC) derivatives market safe and efficient.
It has 815 members from 58 countries including global, international and regional banks, asset managers, energy and commodities firms, government and supranational entities, insurers and diversified financial institutions, corporations, law firms, exchanges, clearinghouse and other service providers.
The Key areas of ISDA are
* Reducing counterparty risk
* Increasing the Transparency
* Improve the OTC operational infrastructure.
The details are provided on the ISDA Brochure
Recently ISDA came under criticism on its decision that based on current evidence the Greek bailout would not prompt payments on the (CDS)credit default swaps. View full article »
Yesterday Merkel quoted all EURO countries must contribute to fight the crisis, seems too bad all but Germany are broke, she also said that European nations will need to cede more power to EU and back to feudalism.Now the ball is in the Greece court.
A new proposal by ECB was that, ECB would tender its bonds in to Greek debt exchange and would help greek to achieve to save approx 11 billion Euros. The condition holds true is that ECB has approx 50 billion euro of Greek bonds, so that will allow Greece to have 39 billion euro of debt instead of 50 billion euro, saving approximately 11 billion euros.
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