Posts Tagged ‘ Structured Products and Derivatives ’

11) I was surprised to read that there is not a perfect market in interest rate swaps.  They are so vanilla, but counterparty risk interferes. 12) There is always a skunk at the party, and who better than Baruch to dis bonds?  I half agree with him.  Half, because the momentum can’t be ignored...
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1) Start with the big one from yesterday.  On of my favorite monetary heretics, Raghuram Rajan, whose excellent book I reviewed, Fault Lines, pointed out how he had gotten it right prior to the crisis, versus many at the Fed who blew it badly.  Rajan suggests that Fed Funds should be at 2-2.25%, which...
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Illiquidity is an underrated risk.  Most financial company failures are due to illiquidity, which usually takes the form of too many illiquid assets and liquid liabilities.  Adding to the difficulty is that it is generally difficult to price illiquid assets, because they don’t trade often. So where do we see failures due to illiquidity?...
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Here are my thoughts on the markets, in no particular order: 1) Momentum draws investors.  Long treasuries have run hard, and people like them now.  My view is, if you want to short them, wait until they rise 0.1% more in yield, then short.  There are a lot of weak longs to shake out....
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Raghuram Rajan made a name for himself at the Jackson Hole conference in 2005, which was a kind of send-off for the victorious Alan Greenspan.  Alas, but the paper he brought was not appreciated at the time, as it pointed to imbalances in the financial system. He was ahead of the curve.  Thus his...
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I’ve read a number of articles on hedging tail risk of late.  Most of them were pretty good; I just want to add in my thoughts. For those who haven’t read the articles, tail risk is when even safe investments get hit hard.  Those market outcomes are rare but severe, so some people look...
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When I reviewed the book Priceless, I thought I had reviewed “Fortune’s Formula,” because I had written several pieces on the Kelly Criterion at the blog and at RealMoney (free at TSCM).  But I found that I had not, so I offer you this review of a book I greatly enjoyed: The book asks...
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I am not sure how many current economic crisis books I have reviewed.  I think I am getting close to a dozen and I am currently reading “Fault Lines.”  I’m not sure I want to do many more crisis book reviews.  Tonight’s review is Complicit, by Mark Gilbert of Bloomberg. Bloomberg columnists are typically...
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This will be a bit of an unusual post for me.  How often do I suggest option trades?  Almost never.  But because of auctioning of TARP warrants, there are a decent number of very long dated options trading on some bank stocks, and many of them are cheap.  I’m here to talk about the...
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This book review is special to me.  I don’t often get quoted in books, but in this book I get quoted on page 98.  Here is the quotation: When I asked an insurance analyst whether he thought the credit rating companies would ever rethink MBIA’s top rating, he was skeptical.  “For Moody’s [or Standard and...
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