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Archive for January, 2013


A year ago in May 2012 JP Morgan made a loss on credit derivatives trading, which chief executive Jamie Dimon blamedJP on errors,sloppiness and bad judgement” and warned “could get worse”. Understanding JP Morgan Loss .

Here are some of the findings by The U.S. Senate Permanent Committee on Investigations, which launched an inquiry into the trading loss last fall, is looking into the how different divisions of the bank wound up on opposite sides of the same trade, said one of the people familiar with the matter. source Reuters   Continue reading

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Having trouble deciding whether you should worry more about the European banking crisis, the U.S. debt cliff or the slowdown in China? If so, you are not alone. But perhaps it is time to take a step back and consider how those worries are affecting your ability to think rationally.

The great expert on this question is the Nobel Prize winning psychologist, Daniel Kahneman. His best-selling book, Thinking, Fast and Slow, describes Mr. Kahneman’s intellectual journey in discovering how humans are hard-wired to make the wrong decisions much of the time.

Among the unhelpful mental biases that Mr. Kahneman discovered is our tendency to be overconfident about our ability to predict the future Continue reading

imagesWe all have heard of CDS (Credit Derivative Swap) But, how many of us have the real idea & concept of CDS cleared with us? I guess very few people. So, here we are ready with our today`s blog which will talk about CDS, its basic concept & origin with its structurally enhanced form/product known as CDX-“Credit Derivative Index Tranche” .

Meaning: In finance, a credit derivative refers to any instrument and technique designed to separate and then transfer the credit risk of the underlying loan. It is a securitized derivative whereby the credit risk is transferred to an entity other than the lender. Continue reading

imagesContinuing with our last blog, today we will discuss in detail about “Equity-Linked Swap” under Structured derivative class.

Meaning: A swap for which payments on one or both sides are linked to the performance of equities or an equity index. Sometimes used to avoid withholding taxes, obtain leverage, or enjoy the returns from ownership without actually owning equity.

Definition: An equity swap is a financial derivative contract (a swap) where a set of future cash flows are agreed to be exchanged between two counterparties at set dates in the future. Continue reading

imagesIn our last few posts we have talked a lot about simple derivatives with their detailed structure and the different approaches, they have towards market. Going onward, we will be discussing another complex form of derivatives known as structured derivative products. We will take up these products one by one separately in detail, within our new series of posts “School-To-College”.

In today`s post, we would be discussing what structured derivatives are all about, Continue reading

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