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Tag Archive: OTC MARKET


Market Efficiency

I dare to write on this topic as it is the most intense and debatable topic in the financial markets over the years.blog

The author of “Fooled by Randomness” and “The Black Swan” Nassim Taleb became the anti-theorist in finance arguing that the Nobel committee should be sued for awarding Harry Markowitz, Bill Sharpe and Merton Miller http://www.bloomberg.com/news/2010-10-08/taleb-says-crisis-makes-nobel-panel-liable-for-legitimizing-economists.html

But the Guru of Corporate finance Aswath Damodaran did a posting replying to him on the market efficiency models. http://aswathdamodaran.blogspot.com/2010/10/nassim-taleb-and-nobel-committee.html Continue reading

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Size is too simple a metric… It really doesn’t matter from a systemic point of view whether you have four banks or forty banks in a blogmarket. It’s the system’s asset concentration – principally in government debt and in mortgage debt – that can be dangerous.”

Sometimes it’s always good to keep brushing yourself, thought of sharing some important glossary on the OTC Market as I was refreshing self on last night:

  • Back loading: The action of clearing already existing bilateral OTC derivatives positions.
  • Collateral management : Typically, two parties enter into an OTC transaction under an Agreement (ISDA framework mainly) that specifies the contractual relationship between the two parties. As part of this Agreement, a specific document (Credit Support Annex/Deed under the ISDA framework) stipulates that some collateral will be exchanged between them to mitigate counterparty risk. Collateral, in the form of cash or securities, is mainly exchanged on the basis of the variation in the value of the exposure between the parties (value of all OTC contracts under the Agreement). This is often referred to as Variation Margin. In addition, Independent Amounts can be requested by one of the parties.

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Europe finally has agreed on the terms of MiFID II, extending its regulatory reach into fixed income, FX, OTC trading and blogcommodity speculation. Here are seven details you need to know as implementation begins.

We still have technical meetings to go through to finalize details, so the complete text is unlikely to be available until won or close to January 27, but here is what we understand so far:

1.  HFT will be restricted through greater testing of algorithms, but there will be no 500 m/s rule.

  • Final organizational requirements for investment firms engaged in algorithmic trading have been passed to ESMA Technical Guidelines for greater analysis concerning the risks potentially raised by technology-advanced trading practices.  Continue reading

swap-it-like-its-hot11They’rrrre baaack. It’s leveraged supersenior kids, but not as you know it. Specifically not as you know it because the new ones are not non-recourse on the leverage, so they have no gap risk for the seller. Now, there are some not-entirely-accurate statements going around about what is actually happening here, so let’s look.

How would you synthesize a leveraged supersenior position? Well, take the underlying CDO, and sell the junior for a fair price.
Then take the senior, put it in an SPV, and fund that vehicle by Continue reading

OTC Derivatives Market

Size is too simple a metric… It really doesn’t matter from a systemic point of view whether you have four banks or forty banks in a market. It’s813530 the system’s asset concentration – principally in government debt and in mortgage debt – that can be dangerous.”

Thought of sharing some Important glossary on the OTC Market as I was refreshing self on last night :

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