Posts tagged 'Risk'

Risk limits are made to be broken

Lisa joined FT Alphaville in September 2011 after a tour of duty through the guts of the financial industry, having worked as an analyst at a bank and for a financial data company. She's now the Head of New Projects for FT.com.

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| Apr 08 11:40 | Comment |

FT Alphaville is (still) poring over (and enjoying) the staff report from the Senate Permanent Subcommittee on Investigations on the JPMorgan “whale” trades in its Chief Investment Office that lost the bank over $6bn. It takes a lot of coffee awhile to get through all 597 pages of exhibits along with the 307-page report, and all the glorious footnotes, so please kindly bear with us.

As it stands, the more we read, the more dirt we turn up. And the uglier we realise this whole episode was, the more we become concerned: if this happened at JPMorgan, where else could it happen?

The below on risk limits serves as a case in point. The tl;dr version in graphs below, but first from the staff report (emphasis ours): Read more

Bank of England’s biannual anxiety survey

Lisa joined FT Alphaville in September 2011 after a tour of duty through the guts of the financial industry, having worked as an analyst at a bank and for a financial data company. She's now the Head of New Projects for FT.com.

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| Nov 20 2012 09:03 | Comment |

On Monday, the results of the Bank of England’s Systemic Risk Survey were out.

How confident are 79 market participants — from hedge funds, banks, building societies, large complex financial institutions, asset managers and insurers — in the UK’s financial system?

Well, it would appear that they’ve gone from approximately umm-errrr-dunno to hmmm: Read more

Do bailed-out banks remain bad, while good banks behave better?

Masa joined the FT in 2009 and has worked on a number of desks across the paper, including Companies, Markets and Comment. She spent much of 2010 in New York covering the US equity markets. But earlier this year she finally saw the light and moved to Alphaville.

She started her career in the investment banking division at Lehman Brothers in the summer of 2007, timing it perfectly with the beginning of the credit crunch.

She studied philosophy, politics and economics at Oxford University.

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| Sep 18 2012 16:08 | Comment |

The trauma and cost of a public rescue must surely teach the bank management concerned to behave in a more prudent manner, right?

Wrong, according to a recent Bank of International Settlements paper. Read more

Pandit’s big idea

| Jan 11 2012 10:22 | Comment |

FT Alphaville has intercepted a recent phone call between banks and their regulators!!!

Regulators: “We’re going to revise the capital adequacy framework and increase transparency in the reporting of risk on bank balance sheets.” Read more

Risk-weighting down under

Kate is FT AV’s Asia Correspondent. She joined FT Alphaville in mid-2011 after carrying out various roles in the FT’s London office since 2005: interactive editor, companies reporter, and founding editor of the FT’s Energy Source blog.

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| Sep 08 2011 12:14 | Comment |

There might be some wiggling about liquidity but the worldwide work of getting banks ready for Basel III goes on. Though there’s been an interesting development in Australia recently.

Australian banks and other savings institutions were this week given some guidance on how they’ll be expected to meet Basel III capital requirements when the Australian Prudential Regulatory Authority (Apra) came out with a discussion paper (PDF) which suggested an accelerated timeline for adopting new rules. Read more

Gold hits another record

Kate is FT AV’s Asia Correspondent. She joined FT Alphaville in mid-2011 after carrying out various roles in the FT’s London office since 2005: interactive editor, companies reporter, and founding editor of the FT’s Energy Source blog.

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| Aug 09 2011 05:07 | Comment |

Bullion gained more than 2 per cent on Tuesday, Reuters reports, roaring to all-time highs for a second consecutive session to stand above $1,750 as equity markets dived on growing fears of a global recession following last week’s US credit downgrade. Traders said investors ranging from sophisticated hedge funds to European savers were turning to bullion as they pulled money out of tumbling equity markets, the FT reports. Investors in gold through exchange traded funds hold a record 2,276 tonnes of gold, more than most central banks. Dealers said sales of coins and small bars to European investors were on Monday the highest so far this year. Read more

Welcome to the Global Sovereign Crisis, says Deutsche

Izabella Kaminska joined FT Alphaville in October 2008. Before that she worked as a producer at CNBC, a natural gas reporter at Platts and an associate editor of BP's internal magazine.

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| Jul 15 2011 19:35 | Comment |

Deutsche Bank’s fixed income research team don’t see any need to beat around the bush.

We’re in the early stages of the Global Sovereign Crisis. End of. Read more

The AAA bubble

Tracy Alloway used to be deputy editor of FT Alphaville. Here she learned the details of derivatives, the absurdities of accounting and the various structures of ... erm ... structured finance. She now covers big US banks for the FT paper, including Goldman Sachs and Morgan Stanley. She pops up on FT Alphaville every once in a while.

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| Jul 15 2011 11:23 | Comment |

This, we think, could well be the most important chart in the world right now:

 Read more

Now you see it now you don’t – collateral transformation

Tracy Alloway used to be deputy editor of FT Alphaville. Here she learned the details of derivatives, the absurdities of accounting and the various structures of ... erm ... structured finance. She now covers big US banks for the FT paper, including Goldman Sachs and Morgan Stanley. She pops up on FT Alphaville every once in a while.

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| Jul 04 2011 13:35 | Comment |

It’s an answer — of sorts — to the $2,200bn dollar question. Read more

Black Swan fatigue

Tracy Alloway used to be deputy editor of FT Alphaville. Here she learned the details of derivatives, the absurdities of accounting and the various structures of ... erm ... structured finance. She now covers big US banks for the FT paper, including Goldman Sachs and Morgan Stanley. She pops up on FT Alphaville every once in a while.

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| Mar 08 2011 09:05 | Comment |

We bring up this dangerous malady, because Citi FX strategist Steven Englander does in his latest piece. But first, take a glance at these charts. The first is the S&P 500 — which is almost at the second anniversary of rebounding from its cycle low:

 Read more

Jumping JGB rates

Tracy Alloway used to be deputy editor of FT Alphaville. Here she learned the details of derivatives, the absurdities of accounting and the various structures of ... erm ... structured finance. She now covers big US banks for the FT paper, including Goldman Sachs and Morgan Stanley. She pops up on FT Alphaville every once in a while.

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| Feb 16 2011 08:52 | Comment |

Never short a Japanese government bond — no matter what you think of the country’s debt-to-GDP ratios, demographics, savings and the like. The JGB market can stay irrational longer than you can stay solvent etc. So swaption it, instead.

Here’s Bank of America Merrill Lynch’s Bin Gao on why: Read more

Nomura calls the end of risk on/risk off

Tracy Alloway used to be deputy editor of FT Alphaville. Here she learned the details of derivatives, the absurdities of accounting and the various structures of ... erm ... structured finance. She now covers big US banks for the FT paper, including Goldman Sachs and Morgan Stanley. She pops up on FT Alphaville every once in a while.

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| Feb 15 2011 10:14 | Comment |

The last time Nomura talked ‘risk on/risk off‘ they thought it had ruptured.

Now they think the market phenomenon — which had seen correlations intensify in recent (QEased and crisis-ed) years — might be ruined for good. Read more

Basel-ed again

Tracy Alloway used to be deputy editor of FT Alphaville. Here she learned the details of derivatives, the absurdities of accounting and the various structures of ... erm ... structured finance. She now covers big US banks for the FT paper, including Goldman Sachs and Morgan Stanley. She pops up on FT Alphaville every once in a while.

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| Dec 20 2010 09:56 | Comment |

Believe us, it’s taken all our willpower to not headline this post as Basel Faulty.

The London Banker has returned to blogging after a two-year hiatus. And boy, that 24-month break has done nothing to quell this former central banker’s ire. Read more

Mystery, chicken, and the ECB’s capital increase

Tracy Alloway used to be deputy editor of FT Alphaville. Here she learned the details of derivatives, the absurdities of accounting and the various structures of ... erm ... structured finance. She now covers big US banks for the FT paper, including Goldman Sachs and Morgan Stanley. She pops up on FT Alphaville every once in a while.

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| Dec 17 2010 11:28 | Comment |

The European Central Bank made headlines on Thursday, with its request for a €5bn capital increase. The stated reason was all about covering volatility in fx, interest rates and gold prices “as well as credit risk” on other (SMP-bought) securities.

Nomura’s European rates team, however, are having none of it: Read more

Going for broke with bank guarantees

Tracy Alloway used to be deputy editor of FT Alphaville. Here she learned the details of derivatives, the absurdities of accounting and the various structures of ... erm ... structured finance. She now covers big US banks for the FT paper, including Goldman Sachs and Morgan Stanley. She pops up on FT Alphaville every once in a while.

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| Dec 06 2010 12:00 | Comment |

Quelle surprise. Or should we say, was fur eine Überraschung?

A new working paper from the European Central Bank describes the augmenting effect of government guarantees on bank risk-taking. In a nutshell: Read more

Korea assault puts markets into risk-off mode

Joseph joined FT Alphaville way back in March 2010. He likes all the politically and legally fiddly bits of finance. He also likes credit, rates, global macro, tail risk, and all that stuff. (You should email him story ideas. He’ll take anything.)

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| Nov 23 2010 18:59 | Comment |

Traders have sought safe havens in gold and the dollar, after a day of international unease begun by North and South Korean forces firing artillery at each other, the FT reports. The Dow’s energy components brought it down to 1.3 per cent in edgy trading also influenced by the developing crisis in the eurozone, but the Dollar Index was up 1.1 per cent, the WSJ adds. Russia, China and the United Nations have urged restraint following North Korea’s attack on civilian targets, the FT says, although South Korea said its military remains at ‘crisis status’, the NYT reports. FT Alphaville captures earlier Asian market sell-offs. Read more

The QE2 Vix untwist

Izabella Kaminska joined FT Alphaville in October 2008. Before that she worked as a producer at CNBC, a natural gas reporter at Platts and an associate editor of BP's internal magazine.

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| Nov 04 2010 09:55 | Comment |

Kathleen Brooks, research director at Gain Capital, warned on Wednesday how a quantitative easing boost from the Fed would, most likely, reverse a recent and unusual trend in the Vix Index.

As she explained, for most of October, the Vix rather unusually has been rising alongside the S&P 500 — the index from which it’s derived. The two indices ordinarily move inversely to each other. Read more

It’s stock lending, Jim, but not as you know it

Izabella Kaminska joined FT Alphaville in October 2008. Before that she worked as a producer at CNBC, a natural gas reporter at Platts and an associate editor of BP's internal magazine.

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| Oct 28 2010 19:07 | Comment |

Risk’s Life & Pension edition draws attention to an interesting development occurring in the pensions and insurance arena.

Banks have supposedly been touting insurance and pensions funds for their liquidity. Read more

‘Copulas have an image problem’

Tracy Alloway used to be deputy editor of FT Alphaville. Here she learned the details of derivatives, the absurdities of accounting and the various structures of ... erm ... structured finance. She now covers big US banks for the FT paper, including Goldman Sachs and Morgan Stanley. She pops up on FT Alphaville every once in a while.

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| Oct 22 2010 15:36 | Comment |

Never were truer words spoken of a mathematical formula.

Out on Friday — some über-Geeky weekend reading for those (still?) interested in financial risk management. It comes courtesy of The Joint Forum, the taskforce set up by the Basel Committee on Banking Supervision, IOSCO and the International Association of Insurance Supervisors, to examine topics of mutual interest. Read more

‘Something exceptional’ is happening in volatility, correlation

Izabella Kaminska joined FT Alphaville in October 2008. Before that she worked as a producer at CNBC, a natural gas reporter at Platts and an associate editor of BP's internal magazine.

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| Oct 22 2010 11:38 | Comment |

Whilst much has been written about the rise in correlation recently — what’s been less frequently observed is the strange disconnection that’s occurring between correlation and volatility.

The two traditionally move together. That is, correlation tends to rise and fall with volatility. Read more

Risk on, risk off, risk on, risk off, risk … ruptured

Tracy Alloway used to be deputy editor of FT Alphaville. Here she learned the details of derivatives, the absurdities of accounting and the various structures of ... erm ... structured finance. She now covers big US banks for the FT paper, including Goldman Sachs and Morgan Stanley. She pops up on FT Alphaville every once in a while.

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| Oct 14 2010 14:05 | Comment |

Nomura’s fixed income team reckon ‘risk on, risk off‘ is too simple.

In fact, they say the recent bout of QE2-inspired herding of risk is breaking down. Read more

Risk on, risk off, risk on, risk off

Tracy Alloway used to be deputy editor of FT Alphaville. Here she learned the details of derivatives, the absurdities of accounting and the various structures of ... erm ... structured finance. She now covers big US banks for the FT paper, including Goldman Sachs and Morgan Stanley. She pops up on FT Alphaville every once in a while.

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| Oct 07 2010 16:10 | Comment |

A rather unusual chart from RBC Capital Markets:

 Read more

Stop the market – the Fed wants to get off

Tracy Alloway used to be deputy editor of FT Alphaville. Here she learned the details of derivatives, the absurdities of accounting and the various structures of ... erm ... structured finance. She now covers big US banks for the FT paper, including Goldman Sachs and Morgan Stanley. She pops up on FT Alphaville every once in a while.

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| Aug 18 2010 13:00 | Comment |

Oops.

The Federal Reserve didn’t mean for its recent QEII announcement – that it would be reinvesting proceeds from its maturing securities portfolio — to so greatly affect investors. Read more

The banking ‘miracle’ – debunked [updated]

Tracy Alloway used to be deputy editor of FT Alphaville. Here she learned the details of derivatives, the absurdities of accounting and the various structures of ... erm ... structured finance. She now covers big US banks for the FT paper, including Goldman Sachs and Morgan Stanley. She pops up on FT Alphaville every once in a while.

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| Jul 14 2010 10:45 | Comment |

The Bank of England’s executive director of financial stability has a refreshingly straight-forward answer to his self-imposed question “The Contribution of the Financial Sector: Miracle or Mirage?”

His response: Read more

One almighty decoupling

Tracy Alloway used to be deputy editor of FT Alphaville. Here she learned the details of derivatives, the absurdities of accounting and the various structures of ... erm ... structured finance. She now covers big US banks for the FT paper, including Goldman Sachs and Morgan Stanley. She pops up on FT Alphaville every once in a while.

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| Jun 11 2010 10:06 | Comment |

Credit Suisse’s analysts have noticed one almighty decoupling in bonds and equities, FT Alphaville notes – safe haven yields are down, but defensive stocks are being beaten by cyclicals. What’s going on? Read more

US optimism prompts risky asset run

Joseph joined FT Alphaville way back in March 2010. He likes all the politically and legally fiddly bits of finance. He also likes credit, rates, global macro, tail risk, and all that stuff. (You should email him story ideas. He’ll take anything.)

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| Apr 26 2010 10:07 | Comment |

Hopes that Greek fiscal woes would be contained and optimism over the US economy encouraged traders to pick up risky assets on Monday, according to the FT’s rolling global markets overview. The FTSE All-World equity index rose 0.5 per cent, just shy of a 19-month high, while commodities saw demand and the euro found some form.

The yen and highly rated sovereign bonds fell back as perceived haven assets lost favour. The S&P 500 equity futures pointed to the benchmark opening unchanged in New York at 1,217. Read more

Pricing risk redux

Tracy Alloway used to be deputy editor of FT Alphaville. Here she learned the details of derivatives, the absurdities of accounting and the various structures of ... erm ... structured finance. She now covers big US banks for the FT paper, including Goldman Sachs and Morgan Stanley. She pops up on FT Alphaville every once in a while.

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| Mar 19 2010 10:51 | Comment |

Alternate title: Irrational exuberance – the sequel.

Former Federal Reserve chairman Alan Greenspan is offering his explanation of the financial meltdown in a paper to be presented at the Brookings Institute on Friday. Read more

How to borrow €1bn without adding to your public debt figures

| Feb 15 2010 13:30 | Comment |

Something tells us the story of Greece’s €1bn currency swap — and particularly the involvement of a bank everyone loves to hate, Goldman Sachs — is going to run and run.

Therefore we are going to republish a large chunk of the original 2003 story from Risk, which has now been unlocked and can be read in full here. Read more