In 1992, The Quantum Group, a hedge fund led by George Soros, made a legendary trade on a bet that the GBP could not maintain its peg to the Deutsche Mark in the European Exchange Rate Mechanism, ERM. The Bank of England spent, in vain, over $3 billion attempting to defend… Read more »
Around 21 billion devices are expected to be interconnected by 2020 according to research firm Gartner. This does not include smartphones and computers. IDC estimates that this year that the Internet of Things (IoT) industry expenditure to exceed $1.7 Trillion. Unsurprisingly, IBM, Google, intel and other tech companies are exploring and… Read more »
The sharp jump in spreads in credit markets in 1998 that brought an end to the hedge fund Long Term Capital Management, and near collapse of the financial system was characterized as a 10 sigma event. An event that would occur once in over a half of the age of our… Read more »
Bond investors must worry about duration risk; how changes of interest rates will effect bond value. Corporate loan investors, typically linked to LIBOR rates resetting frequently, are less concern with duration risk but must deal with less liquid asset and long settlements periods, in the order of 20 days or longer…. Read more »
Few in the Western world would question the fairness of interest payment to a loan creditor. In Islamic banking, interest or ribah, is incompatible with sharia, Islamic code. Curiously, the other two big monotheistic religions Judaism and Christianity share some queasiness about charging interest. Islamic financial products tend to be arranged like partnerships,… Read more »
BNY Mellon, a custodian bank, was this year the unhappy recipient of a record fine of 126 million pounds ($185 million) by the UK Financial Conduct Authority, FCA. The infraction was failure to keep records and reconcile clients assets and failure to segregate clients accounts. The FCA has fined a… Read more »
Banks are expected to lose up to $11 billion in profits to non-banks according to a March study by Goldman Sachs. The situation may deteriorate further as the pace of bank disintermedation and unbundling of their services continues. This seems to confirm the fear of J.P. Morgan chief, Jamie Dimon,… Read more »
Marginig is typically required for future settled instruments like futures and forwards. TBA trades, a type of agency backed MBS with around $180 billion daily volume, has escaped this requirement. The New York Fed estimates up to 1.5 trillion is uncleared and unmargined. It was not until 2014 that rules… Read more »
Adding a large loan to a balance sheet is not an enticing proposition in terms of risk/rewards for a bank. Syndicated loans makes this decision more palatable as is shared among other lenders and can serve as entry point into more lucrative from the issuer. Given that the loan is… Read more »
$4.7 Trillion was borrowed in 2014 as syndicated loans, half of it in the US according to Reuters. Unlike conventional bilateral loans, syndicated loans, are funded by multiple lenders and packaged as a single loan to the borrower. One of these lender is designed by the loan issuer (the borrower)… Read more »