IMPORTANCE OF CREDIT DEFAULT SWAPS IN OVER-THE-COUNTER DERIVATIVE MARKET
|
|
- Archibald Hubbard
- 5 years ago
- Views:
Transcription
1 IMPORTANCE OF CREDIT DEFAULT SWAPS IN OVER-THE-COUNTER DERIVATIVE MARKET Mrs. RINTU ANTHONY Guest Lecturer, Government Law College, Trichur ABSTRACT CDS or credit default swaps are contracts where a protection buyer purchases protection (for a premium) or cover against credit risk of a specific asset or bond sold by a reference entity and if the protection buyer suffers any loss on the asset, the protection seller will make payment to the protection buyer. Global OTC derivative market consists of Foreign exchange contracts, Interest rate contracts, Equity-linked contracts, Commodity contracts and Credit default swaps, and we make an attempt to analyse the role played by CDS. The objective of this paper is to study the relevance of CDS in our financial system and especially its relevance in credit derivative market. Gross notional value of CDS contracts are used to study its growth and effectiveness in derivative especially credit derivative markets. KEYWORDS Credit default swaps, CDS spreads, Gross notional value, CCP, Systematic Risk, Accrued Payment, Premium, Market Sensitivity, Community Governance,
2 1. Introduction In late 1994, Blythe Masters, a member of the J. P. Morgan swaps team, coined the idea of selling the credit risk to the European Bank of Reconstruction and Development, since J. P. Morgan was very particular not to decline the loan demand by Exxon, which was an old client, but the deal would tie up a lot of reserve cash to provide for the risk of the loans going bad. So, if Exxon defaulted, the E.B.R.D. would be ultimately responsible and, in return for taking on the risk, would receive a fee from J. P. Morgan. The deal was so new that it didn t even have a name: eventually, the one settled on was credit-default swap. The story doesn t have a happy ending for the American economy, of course, but things turned out all right for ExxonMobil because critics put the entire blame of 2008 global financial crisis on CDS 2. Theoretical framework A CDS contract establishes a relationship between protection buyer and protection seller and in the event of credit default the settlement i.e. the credit seller will have to reimburse the credit buyer his loss on the terms and conditions of CDS contract they entered and can be made two modes i.e. cash settlement or physical settlement. Eg Suppose a protection buyer purchases 5-year protection on a company at a default swap spread of 300bp. The face value of the protection is $10 million. The protection buyer therefore makes quarterly payments approximately equal to $10 million = $75,000. Assume that after a short period the reference entity suffers a credit event and that the CDS asset of the reference entity has a recovery price of $45 per $100 of face value. The payments are as follows: The protection seller compensates the protection buyer for the loss on the face value of the asset received by the protection buyer. This is equal to $10 million (100% 45%) = $5.5 million. The protection buyer pays the accrued premium from the previous premium payment date to time of the credit event. For example, if the credit event occurs after a month then the protection buyer pays approximately $10 million /12 = $18,750 of premium accrued. Federal Reserve bailout of AIG and the culprit CDS Pre-crisis, the US financial market was experiencing bullish times and it almost seemed impossible for bond issuers to go bankrupt. Consequently, selling CDS became perceived as a lucrative business of collecting premiums, and almost without having to pay anything at all As of the end of 2007, CDS contracts had grown to roughly $60 trillion in global business. When the housing market crashed and subprime mortgage borrowers defaulted, the value of MBS fell drastically. At that point in time, AIG insured more than $440 billion of fixed income investments held by the world s leading financial institutions, including $57.8 billion in paper related to subprime mortgages. These events, coupled with increased collateral requirements due to Namex International Journal of Management Research 78 Vol. 3, Issue No. 2, July Dec ISSN
3 the downgrade of its credit ratings by major rating agencies, eventually caused AIG to suffer a liquidity crunch. It did not have enough cash and other liquid assets to meet its current obligations. By November 2008, the company was almost entirely dependent on the Federal Reserve and the Treasury for funding. According to Federal Reserve data, AIG had borrowed a total of almost $128 billion by the end of the year. Systematic Risk and Relevance of Clearing Houses/CCP (Centralized Counterparties) in CDS markets CDS contracts have to be settled on credit event or default of a specific borrower, and thus CDS are especially sensitive to the state of the overall economy, and also Counterparty risk, which arises when one party to a contract may not be able to fulfill its commitment to the other, is also a systemic concern. The failure of one important participant in the CDS market could destabilize the financial system by inflicting significant losses on many trading partners simultaneously, if the economy moves toward a recession. For example, the likelihood of defaults increases and the expected payoff on credit default swaps can rise quickly. The Depository Trust and Clearing Corporation (DTCC) estimates that in April 2009, the notional amount of credit default swaps outstanding was about $28 trillion. As a result of the overall size of the CDS market and the sensitivity of CDS payoffs to economic conditions, large exposures to credit default swaps can create substantial systemic risk. Because of this potential for systemic risk, and also the incidents of disastrous impact of CDS on global economy, some have argued that credit default swaps should be cleared through central clearing counterparties, or clearinghouses. A CCP interposes itself between the parties to a transaction so that each party contracts only with the CCP and not with the other market participant. In other words, the CCP becomes the buyer to every seller and seller to every buyer. Eg Party A pays periodic premiums to the CCP, which in turn furnishes periodic premiums to Party B. If Party Z were to experience a credit event, Party B would fulfill its contract with the CCP by paying the notional amount to the clearinghouse. Since the CCP s primary risk arises from its counterparties credit quality, the CCP assumes the risk management duties that the counterparties previously undertook in the bilateral market and thus a prerequisite for central clearing include both sufficient contract standardization and reliable, tradable prices. First, a CCP imposes access restrictions to ensure that it trades only with creditworthy partners. Each clearing house has to get approval to clear CDS by their respective regulators which involve satisfying strict criteria mentioned by them, and each serves to transfer and mutualize counterparty credit risk. CDS in India India s fledgling credit default swap (CDS) market kicked-off on Dec 6, 2011 with two deals covering 100 million rupees ($1.9 million) worth of bonds. The deals, both 1-year trades were between ICICI Bank and IDBI Bank (underwriter), at 90 basis points and Namex International Journal of Management Research 79 Vol. 3, Issue No. 2, July Dec ISSN
4 covered 50 million rupees each of 10- year bonds issued by Rural Electrification Corp (REC) and India Railway Finance Corp, according to details on the Clearing Corp of India Ltd s website. The RBI has since then allowed banks to begin hedging their banking and trading books using CDS, signaling that the infrastructure is finally in place for the launch of the instruments in Asia s fourth biggest bond market. The launch of the CDS market in India will encourage foreign institutional investors to invest in domestic corporate bonds. This will provide much needed funding for the projects, including infrastructure sector. However the operations of CDS in India are subject to strict guidelines of RBI which may be termed an effort to prevent replicas of 2008 subprime crises. 3. Literature Review Mark J. Flannery, Joel. Houston & Frank (2010) stated that CDS spreads are more viable than credit ratings. Thus, CDS spreads are a promising market based tool for regulatory and private purposes, and they may serve as a viable substitute for credit ratings. Jeffrey L. Callen, Joshua Livnat and Dan Segal (2008) found that the earnings (cash flows, accruals) of reference firms are negatively and significantly correlated with the level of CDS premia, consistent with earnings (cash flows, accruals). Johnson (2013) advocates the adoption of a community governance model which addresses the most disconcerting conflicts in the credit default swap industry, and incorporates important normative considerations and oversight by an external authority. The Squam Lake Working Group (2008) studies and explains the concepts of clearing houses and studies its relevance in CDS market in the wake of 2008 global meltdown. 4. Objectives of the study To study the working and growth of CDS over the years. To study the relevance CDS has in OTC derivative markets. To study the relevance of clearing houses in CDS markets. To study Indian CDS markets. 5. Methodological framework The data used in this paper is secondary data collected from websites of BIS(bank for international settlements), CDS pricing agencies, research publication, journal etc and notional value of CDS is collected for a time period ranging from 2004 to The data regarding clearing of CDS contracts is collected from U.S. Commodities Futures Trading Commission (CFTC). It was on November 14, 2012, the Commission began the weekly publication of a proposed version of the CFTC Swaps Report, a Commission transparency initiative to aggregate and publish swaps market data. Thus data is collected from 2012 end to 2014 on quarterly basis. Namex International Journal of Management Research 80 Vol. 3, Issue No. 2, July Dec ISSN
5 Tools used Simple percentage analysis and mean percentages are used to understand the importance of CDS in OTC market. Also compounded annual growth rate method is used to denote the growth of CDS over the years. Limitations of the Study transperancy and availing the complete data is not possible. Collection of data for Indian CDS market is a tough process because of absence of a central regulating organization. The main sources of data for CDS are BIS and DTCC, which differ from each other mainly because of difference in their sampling techniques. Since almost all the CDS are traded OTC, it suffers from lack of 6. Data analysis and findings TABLE No. 1 - Gross Notional Value Amounts Outstanding, In Billions Of US dollars of CDS Contract and Trend Analysis from 2004 To 2013 Year End Notional Amount Percent Of Growth Of CDS For Every Year As Outstanding Compared To Previous Year , , % , % , % , % ,693-22% , % ,626-4% , % ,020 Source :BIS (Bank for International settlement ) TABLE No. 2 - CAGR (Compounded Annual Growth Rate) Of Different Components of OTC Derivative Market Components of OTC Market Percent of CAGR Foreign exchange contracts 9.15% Interest rate contracts 11.86% Equity-linked contracts 4.11% Commodity contracts 4.33% Credit default swaps 12.63% Thus we find that CAGR is highest for credit default swaps Namex International Journal of Management Research 81 Vol. 3, Issue No. 2, July Dec ISSN
6 FIGURE No. 1 - Gross Notional Value Of CDS Contract From 2004 To 2013 From the table and figure given above, we find that the gross notional value of CDS is at its peak in 2007 and then starts to decline from thereon. However till 2007, the percentage increase in value as compared to the previous year is very high, more than 100%, and after 2007 there is a step decline with 28% but after 2009, even though there is a decline, the percentage fall as compared to previous year are very small. Year TABLE No. 3 - Components of Global OTC Derivatives Market, Amounts in Billions of US Dollars from 2004 To 2013 Foreign Exchange Interest Rate Equity- Linked Commodity Credit Default Swaps Unallocated Total , , , , , , , , , , , , , , , , , , , ,182 Source : BIS TABLE No. 4 - Percentage of Each Components of Global OTC Derivatives Market, Amounts In Billions of US Dollars from 2004 to 2013 and Their Mean Percent Year Foreign Exchange Interest Rate Equity- Linked Commodity Credit Default Swaps % 73.87% 1.70% 0.56% 2.48% % 71.21% 1.95% 1.83% 4.67% % 70.29% 1.81% 1.72% 6.91% % 66.04% 1.42% 1.42% 9.72% % 70.50% 1.13% 0.70% 7.65% % 74.49% 0.98% 0.49% 5.41% Namex International Journal of Management Research 82 Vol. 3, Issue No. 2, July Dec ISSN
7 % 77.41% 0.94% 0.49% 4.97% % 77.82% 0.92% 0.48% 4.42% % 77.41% 0.49% 0.41% 3.96% % 82.28% 0.92% 0.31% 2.96% Mean percentage 9.72% 74.13% 1.23% 0.84% 5.32% The above percentages and mean percentage in the table shows that highest representation of OTC derivative market is made by Interest rate derivates followed by foreign exchange derivates followed by credit default swaps, followed by equity liked and commodity derivatives. TABLE No. 5 - Gross Notional Value Of CDS Which Are Cleared Through CCP And Not Cleared And Their Percentages, Amounts In Billions Of US Dollars From 2012 To 2014 On Quarterly Basis. Year Cleared Percentage Uncleared Percentage Dec '12 2, , March '13 2, , June '13 2, , Sept '13 3, , Dec '13 2, , March '14 2, , June '14 1, , Mean Percent Source: CFTC From the above table we find that even after the introduction of clearinghouses majority of the clearing houses are not cleared through CCPs. (Due to a technical coding error there is a wide deal of difference in values from December 2013 ). TABLE No. 6 - Credit default swaps by rating category Notional amounts outstanding at end December 2013 (In millions of US dollars). Instruments And Counterparties Total Investment Grade AAA/AA Investment Grade A/BBB Investment Grade <BB Non- Rated Total CDS contracts 21,019,859 1,682,804 11,522,299 4,866,907 2,947,849 Reporting dealers 11,052,822 1,174, ,486,343 1,559,149 Other financial institutions 9,779, , ,311,958 1,356,279 Central counterparties 5,518,173 81, ,363, ,001 Banks and security firms 1,724, , , ,186 Insurance and financial guaranty firms 209,103 23,121 78,586 43,969 63,427 SPVs, SPCs and SPEs 362,931 42, ,202 42, ,361 TABLE No. 7- Credit rated instruments as a percentage of total amounts outstanding at end December Instruments And Counterparties % Of Grade AAA/AA Debts % Of Grade A/BBB Debts % Of Less Than BB Debts % Of Non Rated Debts Total CDS Namex International Journal of Management Research 83 Vol. 3, Issue No. 2, July Dec ISSN
8 Reporting Dealers Other Financial Institutions Central Counterparties Banks And Security Firms Insurance And Financial Guaranty Firms Table shows that approximately 50% of CDS contracts are bought for instruments with grade A/BBB and lesser for less than BB grade debts and again lesser for non rated debts. CDS contracts are significantly least for AAA/AA debts. TABLE No. 8 - Showing Percentage of Indian CDS Market to the Global CDS Market Date Total Gross Notional Value Of Important Indian Players Total Gross Notional Value Of Global CDS Single Reference Entity Percent Of Indian CDS Market To Global CDS Market 06/29/ ,503, /28/ ,347, /28/ ,469, /27/ ,731, /27/ ,009, Source: DTCC The above table shows that the maximum representation of India in global CDS market is in the year 2012 with 0.21% and minimum representation is in the year 2014 with 0.16%. 7. Findings and suggestions From 2004 onwards the CDS markets keep on increasing till 2007 and after 2008, the CDS market halves itself with a 38% decline as a result of trade compression. After 2008, the markets keep declining but the rate of decline is almost stagnant as compared to rate of growth before While studying OTC derivative market, we find that CDS is an important segment because it has the highest growth with respect to CAGR and also it stands at third position with respect to its representation in OTC derivative market after Interest rate derivates and foreign exchange derivates. Even after the introduction of clearing houses to safeguard against systematic risk and avoid repetition of 2008 financial crunch majority of the clearing houses are not cleared through CCPs. The reason could be that derivative players don t want to undertrake another procedural delay or would not be able to get their contracts cleared because of strict conditions laid down by clearing houses. Volume of CDS are higher on debts with a higher credit rating especially grade A/BBB debts and CDS are lowest for debts which are not rated. A significant finding we made here is that debts with grade AAA/AA are traded least the default probability being nil, protection is least required. The Indian CDS markets are insignificant with an approximate Namex International Journal of Management Research 84 Vol. 3, Issue No. 2, July Dec ISSN
9 percentage of 0.20 in the global CDS markets.. In Indian market the major players in CDS market are SBI, ICICI bank, Reliance industries, IDBI bank, Bank of India with SBI leading with highest volume of notional value. Suggestions Eventhough CDS is a very useful credit derivative to hedge risk and distribute the credit risk, risk perception and fear of counterparty risk cannot be done away with unless a strong regulating mechanism to govern and control the CDS market is introduced. Such regulating mechanism should also be capable of enhancing transparency and liquidity in CDS markets. Function of clearing houses should be enhanced and its role in CDS markets should be improved. Since CDS transfer the risk associated with credit, Indian loans can be secured by the use of CDS and funds could beraised from foreign institutional investors which could serve as an important milestone to improve the economy of India. Conclusion Thus by enhancing liquidity and transparency in CDS market, CDS due to its immense benefits could be converted to strengthen the financial system and boost the economy. Also by RBI and excessive fear in the minds of investors have deterred the growth of CDS in India. and hence liberalizing the rules and opening the markets to overseas player can contribute in reforming this sector. REFERENCES Joe Romm May 26,2010. RMS - Risk Management Society,18 th May 2013 ISDA - International Swaps and Derivatives Association (November 2009): AIG and Credit Default Swaps ICE Global credit derivatives markets overview: Evolution, Standardization and Clearing' March dated Dec RBI Draft Report of the Internal Group on Introduction of Credit Default Swaps for Corporate Bonds, available at iondraftreports. Mark j. Flannery, Joel f. Houston & Frank partnoy(2010) credit default swap spreads as viable Substitutes for credit ratings university of pennsylvania law review [vol. 158: 2085]. Jeffrey L. Callen, Joshua Livnat and Dan Segal(2008) The Impact of Earnings on the Pricing of Credit Default Swaps Kristin N. Johnson (2010) Things fall apart: regulating the credit default swap commons University of Colorado Law Review [vol. 82]. U.S. Commodity Futures Trading Commission. Depository trust and clearing corporation (DTCC). Namex International Journal of Management Research 85 Vol. 3, Issue No. 2, July Dec ISSN
The Changing Landscape for Derivatives. John Hull Joseph L. Rotman School of Management University of Toronto.
The Changing Landscape for Derivatives John Hull Joseph L. Rotman School of Management University of Toronto hull@rotman.utoronto.ca April 2014 ABSTRACT This paper describes the changes taking place in
More informationRegulatory Reform of the Over-the- Counter Derivatives Markets: A Solution for the AIG Catastrophe?
Regulatory Reform of the Over-the- Counter Derivatives Markets: A Solution for the AIG Catastrophe? Prof. Nancy Wallace University of California, Berkeley Haas School of Business October 10, 2009 Amplification
More informationNON PERFORMING ASSETS: A COMPARATIVE STUDY ON STATE BANK OF INDIA AND PUNJAB NATIONAL BANK
NON PERFORMING ASSETS: A COMPARATIVE STUDY ON STATE BANK OF INDIA AND PUNJAB NATIONAL BANK SHIVANI VAID Assistant Professor, Department of Commerce, St. Bede s College, Shimla, Himachal Pradesh ABSTRACT
More informationStatistical release: OTC derivatives statistics at end-december Monetary and Economic Department
Statistical release: OTC derivatives statistics at end-december 2011 Monetary and Economic Department May 2012 Queries concerning this release should be addressed to the authors listed below: Section I:
More informationStatistical release: OTC derivatives statistics at end-june Monetary and Economic Department
Statistical release: OTC derivatives statistics at end-june 202 Monetary and Economic Department November 202 Queries concerning this release should be addressed to ibfs.derivatives@bis.org. Bank for International
More informationBy Khader Shaik CDS Market - The Big Picture Copyright 2011 Khader Shaik (ksvali.com) 1
By Khader Shaik 1 CDS Credit Default Swap CDS is an agreement between two parties in reference to an external entity known as Reference Entity, in which one party known as Protection Buyer pays the periodic
More information25 Oct 2010 QIAO Yang SHEN Si
Credit Derivatives: CDS, CDO and financial crisis 25 Oct 2010 QIAO Yang SHEN Si 1 Agenda Historical background: what is Credit Default Swaps (CDS) and Collateralized Default Obligation (CDO) Issue and
More informationSTATEMENT OF GARY GENSLER CHAIRMAN, COMMODITY FUTURES TRADING COMMISSION BEFORE THE FINANCIAL CRISIS INQUIRY COMMISSION.
STATEMENT OF GARY GENSLER CHAIRMAN, COMMODITY FUTURES TRADING COMMISSION BEFORE THE FINANCIAL CRISIS INQUIRY COMMISSION July 1, 2010 Good afternoon Chairman Angelides, Vice Chairman Thomas and members
More informationInterest Rate Futures Products for Indian Market. By Golaka C Nath
Interest Rate Futures Products for Indian Market By Golaka C Nath Interest rate derivatives have been widely used in international markets by banks, institutions, corporate sector and common investors.
More informationManaging Risk off the Balance Sheet with Derivative Securities
Managing Risk off the Balance Sheet Managing Risk off the Balance Sheet with Derivative Securities Managers are increasingly turning to off-balance-sheet (OBS) instruments such as forwards, futures, options,
More informationInterest Rates & Credit Derivatives
Interest Rates & Credit Derivatives Ashish Ghiya Derivium Tradition (India) 25/06/14 1 Agenda Introduction to Interest Rate & Credit Derivatives Practical Uses of Derivatives Derivatives Going Wrong Practical
More informationInformation, Liquidity, and the (Ongoing) Panic of 2007*
Information, Liquidity, and the (Ongoing) Panic of 2007* Gary Gorton Yale School of Management and NBER Prepared for AER Papers & Proceedings, 2009. This version: December 31, 2008 Abstract The credit
More informationCOPYRIGHTED MATERIAL. 1 The Credit Derivatives Market 1.1 INTRODUCTION
1 The Credit Derivatives Market 1.1 INTRODUCTION Without a doubt, credit derivatives have revolutionised the trading and management of credit risk. They have made it easier for banks, who have historically
More informationNew York Washington London Hong Kong 120 Broadway, 35th Floor New York, NY P: F:
Testimony of the Securities Industry and Financial Markets Association Before the New York State Assembly Standing Committee on Insurance Hearing on New York s Regulation of the Credit Default Swap Market
More informationCREDIT DEFAULT SWAPS AND THEIR APPLICATION
CREDIT DEFAULT SWAPS AND THEIR APPLICATION Dr Ewelina Sokołowska, Dr Justyna Łapińska Nicolaus Copernicus University Torun, Faculty of Economic Sciences and Management, ul. Gagarina 11, 87-100 Toruń, e-mail:
More informationNUMBERS TO THINK ABOUT WHAT DO THESE NUMBERS MEAN? 930,000 US $ 12 BILLION US $ 1 TRILLION US $ 213 TRILLION
NUMBERS TO THINK ABOUT WHAT DO THESE NUMBERS MEAN? 930,000 US $ 12 BILLION US $ 1 TRILLION US $ 213 TRILLION ROLE OF REGULATORY POLICY TWO MAIN PRINCIPLES OF MOST LAWS AND REGULATIONS INVOLVING FINANCIAL
More informationCERTIFIED FORENSIC LOAN AUDITORS, LLC CREDIT DEFAULT SWAP REPORT
CERTIFIED FORENSIC LOAN AUDITORS, LLC 13101 West Washington Blvd., Suite 140, Los Angeles, CA 90066 Phone: 310-432-6304; Sales@CertifiedForensicLoanAuditors.com www.certifiedforensicloanauditors.com CREDIT
More informationCounterparty Credit Risk Management in the US Over-the-Counter (OTC) Derivatives Markets, Part II
November 2011 Counterparty Credit Risk Management in the US Over-the-Counter (OTC) Derivatives Markets, Part II A Review of Monoline Exposures Introduction This past August, ISDA published a short paper
More informationDerivatives: How Do They Impact Your Client?
Derivatives: How Do They Impact Your Client? Dallas Bar Association Securities Section October 22, 2012 Craig Enochs Jackson Walker L.L.P. Overview What are derivatives? How are derivatives documented?
More informationb. Financial innovation and/or financial liberalization (the elimination of restrictions on financial markets) can cause financial firms to go on a
Financial Crises This lecture begins by examining the features of a financial crisis. It then describes the causes and consequences of the 2008 financial crisis and the resulting changes in financial regulations.
More informationDeriv/SERV Trade Repository Update DTCC
Deriv/SERV Trade Repository Update Deriv/SERV: Early History Deriv/SERV, a subsidiary of DTCC established in 2003, operates as an at-cost, industry owned, utility provider. Focus on Post-Trade Processing
More informationDiscussion of Replumbing Our Financial System: Uneven Progress
Discussion of Replumbing Our Financial System: Uneven Progress Stephen G. Cecchetti Bank for International Settlements 1. Introduction Professor Duffie has written a wide-ranging and thoughtful paper on
More informationMerrill Lynch, Pierce, Fenner & Smith Incorporated and Subsidiaries (SEC ID No ) Consolidated Balance Sheet June 30, 2013
Merrill Lynch, Pierce, Fenner & Smith Incorporated and Subsidiaries (SEC ID No. 8-7221) Consolidated Balance Sheet Index Page(s) Balance Sheet Consolidated Balance Sheet... 1-2... 3 42 Consolidated Balance
More informationMERRILL LYNCH PROFESSIONAL CLEARING CORP. (S.E.C. I.D. No ) BALANCE SHEET AS OF JUNE 27, 2008 (UNAUDITED) * * * * * * *
MERRILL LYNCH PROFESSIONAL CLEARING CORP. (S.E.C. I.D. No. 8-33359) BALANCE SHEET AS OF JUNE 27, 2008 (UNAUDITED) * * * * * * * MEMBERS NEW YORK STOCK EXCHANGE, INC. AND OTHER PRINCIPAL U.S. EXCHANGES
More informationMercer US Large Cap Growth Equity Fund N/A N/A N/A MLCGX. Mercer US Large Cap Value Equity Fund N/A N/A N/A MLVCX
Mercer Funds STATEMENT OF ADDITIONAL INFORMATION July 31, 2014 Mercer Funds (the Trust ), is an open-end management investment company that currently offers shares in nine separate and distinct series,
More informationTHE NATURE OF THE DERIVATIVE MARKET TRANSACTIONS TRADED IN THE JOHANNESBURG SECURITIES EXCHANGE
THE NATURE OF THE DERIVATIVE MARKET TRANSACTIONS TRADED IN THE JOHANNESBURG SECURITIES EXCHANGE Tankiso Moloi * Abstract The main objective of the study was to assess and understand the nature of derivative
More informationAccess VP High Yield Fund SM
Access VP High Yield Fund SM Prospectus MAY 1, 2013 Like shares of all mutual funds, these securities have not been approved or disapproved by the Securities and Exchange Commission nor has the Securities
More informationChanges in US OTC markets since the crisis
Changes in US OTC markets since the crisis Nina Boyarchenko Federal Reserve Bank of New York The views expressed herein are the author s and are not representative of the views of the Federal Reserve Bank
More informationGLOBAL DERIVATIVES MARKET
GLOBAL DERIVATIVES MARKET Aleksandra Stankovska European University Republic of Macedonia, Skopje, email: aleksandra. stankovska@eurm.edu.mk DOI: 10.1515/seeur-2017-0006 Abstract Globalization of financial
More informationA Proposal to Mitigate Credit Risk
A Proposal to Mitigate Credit Risk New South Wales Electricity Businesses Risk Management Proposal for NSW Treasury 12 July 2004 Synopsis This Proposal outlines a mechanism that will enable NSW Treasury
More informationALLIANCEBERNSTEIN INFLATION STRATEGIES
Global Wealth Management A unit of AllianceBernstein L.P. ALLIANCEBERNSTEIN INFLATION STRATEGIES -AllianceBernstein Bond Inflation Strategy (Class A ABNAX; Class C ABNCX; Advisor Class ABNYX; Class R-ABNRX;
More informationWikiLeaks Document Release
WikiLeaks Document Release February 2, 2009 Congressional Research Service Report RS22932 Credit Default Swaps: Frequently Asked Questions Edward Vincent Murphy, Government and Finance Division September
More informationSUMMARY OF THE IMPACT ASSESSMENT
EUROPEAN COMMISSION Brussels, SEC(2010) 1059 COMMISSION STAFF WORKING DOCUMT SUMMARY OF THE IMPACT ASSESSMT Accompanying document to the Proposal for a REGULATION OF THE EUROPEAN PARLIAMT AND OF THE COUNCIL
More informationKeynes Animal Spirits in the financial markets
riskupdate GLOBAL The quarterly independent risk review for banks and financial institutions worldwide nov / dec 2012 Keynes Animal Spirits in the financial markets Also in this issue n Black Swans Mean
More informationFederated U.S. Government Securities Fund: 1-3 Years
Prospectus April 30, 2018 The information contained herein relates to all classes of the Fund s Shares, as listed below, unless otherwise noted. Share Class Ticker Institutional FSGVX Service FSGIX Y FSGTX
More informationCredit Derivatives. By A. V. Vedpuriswar
Credit Derivatives By A. V. Vedpuriswar September 17, 2017 Historical perspective on credit derivatives Traditionally, credit risk has differentiated commercial banks from investment banks. Commercial
More informationFederated U.S. Government Securities Fund: 2-5 Years
Prospectus March 31, 2013 Share Class R Institutional Service Ticker FIGKX FIGTX FIGIX Federated U.S. Government Securities Fund: 2-5 Years The information contained herein relates to all classes of the
More informationTWEEDY, BROWNE GLOBAL VALUE FUND TWEEDY, BROWNE GLOBAL VALUE FUND II - CURRENCY UNHEDGED TWEEDY, BROWNE VALUE FUND
TWEEDY, BROWNE GLOBAL VALUE FUND TWEEDY, BROWNE GLOBAL VALUE FUND II - CURRENCY UNHEDGED TWEEDY, BROWNE VALUE FUND TWEEDY, BROWNE WORLDWIDE HIGH DIVIDEND YIELD VALUE FUND TBGVX TBCUX TWEBX TBHDX each a
More informationTestimony Concerning Regulation of Over-The-Counter Derivatives
Page 1 of 11 Home Previous Page Testimony Concerning Regulation of Over-The-Counter Derivatives by Chairman Mary L. Schapiro U.S. Securities and Exchange Commission Before the Subcommittee on Securities,
More informationRegulatory Reform and Collateral Management: The Impact on Major Participants in the OTC Derivatives Markets
Regulatory Reform and Collateral Management: The Impact on Major Participants in the OTC Derivatives Markets 4 J.P. Morgan thought / Winter 2012 The new regulations that will take effect in the wake of
More informationThe Private-Money View of Financial Crises. Gary Gorton, Yale and NBER
The Private-Money View of Financial Crises Gary Gorton, Yale and NBER Financial Crises Doug Diamond: Financial crises are everywhere and always due to problems of short-term debt (and to the reasons why
More informationWhy we re not getting too comfortable in our fixed income risk assessment
Lyle Sankar Why we re not getting too comfortable in our fixed income risk assessment Lyle joined the Fixed Income team at PSG Asset Management in 2014. He performs credit and fixed income analysis and
More informationEfficacy of Interest Rate Futures for Corporate
Efficacy of Interest Rate Futures for Corporate The financial sector, corporate and even households are affected by interest rate risk. Interest rate fluctuations impact portfolios of banks, insurance
More informationI. INTRODUCTION ANALYZING THE RISKS INVOLVED IN OVER-THE-COUNTER DERIVATIVES CONTRACTS. Pankaj Sevta & Shubhanshu Gupta
ANALYZING THE RISKS INVOLVED IN OVER-THE-COUNTER DERIVATIVES CONTRACTS Pankaj Sevta & Shubhanshu Gupta 5 th Year & 4 th Year, National Law University Odisha I. INTRODUCTION A derivative is a risk transfer
More informationCost of home today is double the amount in weeks of labour time compared to 1970s: New study
Cost of home today is double the amount in weeks of labour time compared to 1970s: New study May 2016 Marc Lavoie* *Marc Lavoie is Professor in the Department of Economics at the University of Ottawa and
More informationSTRENGTHENING FINANCIAL STABILITY EUROPEAN MARKET INFRASTRUCTURE REGULATION (EMIR) OVERVIEW AND INDUSTRY PRIORITIES
STRENGTHENING FINANCIAL STABILITY EUROPEAN MARKET INFRASTRUCTURE REGULATION (EMIR) OVERVIEW AND INDUSTRY PRIORITIES BACKGROUND AND CONTEXT In the wake of the 2008 Financial Crisis, world leaders met in
More informationThe Financial System. Sherif Khalifa. Sherif Khalifa () The Financial System 1 / 52
The Financial System Sherif Khalifa Sherif Khalifa () The Financial System 1 / 52 Financial System Definition The financial system consists of those institutions in the economy that matches saving with
More informationMORGAN STANLEY & CO. LLC (SEC I.D. No ) CONSOLIDATED STATEMENT OF FINANCIAL CONDITION AS OF DECEMBER 31, 2011 AND INDEPENDENT AUDITORS REPORT
MORGAN STANLEY & CO. LLC (SEC I.D. No. 8-15869) CONSOLIDATED STATEMENT OF FINANCIAL CONDITION AS OF DECEMBER 31, 2011 AND INDEPENDENT AUDITORS REPORT ******** INDEPENDENT AUDITORS REPORT To the Board of
More information1. Primary markets are markets in which users of funds raise cash by selling securities to funds' suppliers.
Test Bank Financial Markets and Institutions 6th Edition Saunders Complete download Financial Markets and Institutions 6th Edition TEST BANK by Saunders, Cornett: https://testbankarea.com/download/financial-markets-institutions-6th-editiontest-bank-saunders-cornett/
More informationPotential Impact to Foreign Exchange Risk Management - Dodd-Frank Bill!
Potential Impact to Foreign Exchange Risk Management - Dodd-Frank Bill! April 7, 2011 Presented by: Mary Ann Dowling, Principal 2011 Treasury Strategies, Inc. All rights reserved. Dodd-Frank Act Passed
More informationInvesco V.I. Government Securities Fund
Quarterly Schedule of Portfolio Holdings March 31, 2018 invesco.com/us VIGOV-QTR-1 05/18 Invesco Advisers, Inc. Schedule of Investments March 31, 2018 (Unaudited) Principal Amount Value U.S. Government
More informationFINANCIAL MARKET OPERATIONS (UNIT-3) STOCK MARKET (PART-2)
FINANCIAL MARKET OPERATIONS (UNIT-3) STOCK MARKET (PART-2) 1. INTRODUCTION Hello viewers! Welcome to the lecture series of financial market operations. Today we shall take up part 2 of the unit 3 rd. We
More informationAPIR: PER0760AU ARSN: ISIN: AU60PER07600
JPMorgan Multi-Manager Alternatives Fund Supplementary Information APIR: PER0760AU ARSN: 612 459 864 ISIN: AU60PER07600 Benchmark: Bloomberg AusBond Bank Bill Index 1 PORTFOLIO ALLOCATION OF THE UNDERLYING
More informationFederated Equity Income Fund, Inc.
Statement of Additional Information January 31, 2018 Share Class Ticker A LEIFX B LEIBX C LEICX F LFEIX R FDERX Institutional LEISX Federated Equity Income Fund, Inc. This Statement of Additional Information
More informationThe Financial System. Sherif Khalifa. Sherif Khalifa () The Financial System 1 / 55
The Financial System Sherif Khalifa Sherif Khalifa () The Financial System 1 / 55 The financial system consists of those institutions in the economy that matches saving with investment. The financial system
More informationInvesco V.I. Government Securities Fund
Prospectus April 30, 2018 Series I shares Invesco V.I. Government Securities Fund Shares of the Fund are currently offered only to insurance company separate accounts funding variable annuity contracts
More informationINTERACTIVE BROKERS CANADA INC. (a wholly-owned subsidiary of IBG LLC)
Financial statements of INTERACTIVE BROKERS CANADA INC. (a wholly-owned subsidiary of IBG LLC) December 31, 2016 and December 31, 2015 Table of contents Independent Auditor s report... 1 Statements of
More informationAviva Investors response to CESR s Technical Advice to the European Commission in the context of the MiFID Review: Non-equity markets transparency
Aviva Investors response to CESR s Technical Advice to the European Commission in the context of the MiFID Review: Non-equity markets transparency Aviva plc is the world s fifth-largest 1 insurance group,
More informationWall Street and Commercial Real Estate
Wall Street and Commercial Real Estate Everett Allen Greer March 16, 2011 Los Angeles Los Angeles 213.985.3800 New York 646.867.1600 San Francisco 415.233.6300 Dallas 214.347.7500 Greer Miami Advisors,
More informationCOMMISSION IMPLEMENTING DECISION (EU) / of XXX
EUROPEAN COMMISSION Brussels, XXX [ ](2017) XXX draft COMMISSION IMPLEMENTING DECISION (EU) / of XXX on the recognition of the legal, supervisory and enforcement arrangements of the United States of America
More informationGetting fit for clearing
www.pwc.co.uk/consulting Getting fit for clearing Pursuing the OTC central clearing market Only those who will risk going too far can possibly find out how far one can go. T.S. Eliot Diamond Advisory Services
More informationFEDERAL RESERVE BANK OF CHICAGO. Research Department Financial Markets Group. 230 South LaSalle Street Chicago, Illinois U.S.A.
FEDERAL RESERVE BANK OF CHICAGO Research Department Financial Markets Group 230 South LaSalle Street Chicago, Illinois U.S.A. Working Paper No. PDP 2016-1 * September 2016 Resolving central counterparties
More informationResilience of OTC Derivatives Market: Regulatory Initiatives 11/16/2009 1
Resilience of OTC Derivatives Market: Regulatory Initiatives and Policy Recommendations A Paper Presented at the Conference on South Asian Financial Systems at Cross-roads: roads: Promoting Stability and
More informationCredit Risk in Banking
Credit Risk in Banking CREDIT DERIVATIVES Hull J., Options, futures, and other derivatives, Ed. 7, chapter 23 Sebastiano Vitali, 2017/2018 Credit derivatives Credit derivatives are contracts where the
More informationDerivatives Markets Frequently Asked Questions (see IP/09/1546)
MEMO/09/465 Brussels, 20 th October 2009 Derivatives Markets Frequently Asked Questions (see IP/09/1546) GENERAL APPROACH You propose a comprehensive solution for all derivatives markets. Does that not
More informationFederated Institutional High Yield Bond Fund
Prospectus December 31, 2017 Share Class Ticker Institutional FIHBX R6 FIHLX Federated Institutional High Yield Bond Fund A Portfolio of Federated Institutional Trust A mutual fund seeking high current
More informationState Street Bank and Trust Company SSgA Target Retirement 2050 Non-Lending Series Fund Financial Statements December 31, 2014
Financial Statements Independent Auditor's Report To the Trustee of State Street Bank and Trust Company We have audited the accompanying financial statements of State Street Bank and Trust Company SSgA
More informationEC248-Financial Innovations and Monetary Policy Assignment. Andrew Townsend
EC248-Financial Innovations and Monetary Policy Assignment Discuss the concept of too big to fail within the financial sector. What are the arguments in favour of this concept, and what are possible negative
More informationOTC Derivatives Trading Under the Financial Reform Bill: Is It Tough Enough?
The University of Akron From the SelectedWorks of Willa E Gibson March 31, 2010 OTC Derivatives Trading Under the Financial Reform Bill: Is It Tough Enough? Willa E Gibson, University of Akron School of
More informationDerivatives Use Policy. Updated and Approved by the Board of Trustees November 13, 2014
Derivatives Use Policy Updated and Approved by the Board of Trustees November 13, 2014 Originated July 22, 2010 Table of Contents 1. STATEMENT OF PURPOSE... 1 2. SUBORDINATE POLICIES... 1 3. AUTHORIZATIONS...
More informationBasel III Pillar 3 Disclosures Report. For the Quarterly Period Ended December 31, 2015
BASEL III PILLAR 3 DISCLOSURES REPORT For the quarterly period ended December 31, 2015 Table of Contents Page 1 Morgan Stanley... 1 2 Capital Framework... 1 3 Capital Structure... 2 4 Capital Adequacy...
More informationCredit derivatives are derivative contracts that seek to transfer
Introduction to Securitization by Frank J. Fabozzi and Vinod Kothari Copyright 2008 John Wiley & Sons, Inc. APPENDIX A Basics of Credit Derivatives Credit derivatives are derivative contracts that seek
More informationOppenheimer Champion Income Fund
by Geng Deng, Craig McCann and Joshua Mallett 1 Abstract During the second half of 2008, Oppenheimer s Champion Income Fund lost 80% of its value - more than any other mutual fund in Morningstar s high-yield
More informationINTERACTIVE BROKERS CANADA INC. (a wholly-owned subsidiary of IBG LLC)
Financial statements of INTERACTIVE BROKERS CANADA INC. (a wholly-owned subsidiary of IBG LLC) December 31, 2017 and December 31, 2016 Table of contents Independent Auditor s Report... 1 Statements of
More informationClearing Requirement Determination Under Section 2(h) of the CEA RIN Number 3038 AD86
September 6, 2012 Via Electronic Submission: http://comments.cftc.gov David A. Stawick Secretary of the Commission Commodity Futures Trading Commission Three Lafayette Centre 1155 21st Street NW Washington,
More informationAB Variable Products Series Fund, Inc.
. PROSPECTUS MAY 1, 2018 AB Variable Products Series Fund, Inc. Class A Prospectus AB VPS Intermediate Bond Portfolio This Prospectus describes the Portfolio that is available as an underlying investment
More informationMORGAN STANLEY SMITH BARNEY LLC CONSOLIDATED STATEMENT OF FINANCIAL CONDITION AS OF JUNE 30, 2017 (UNAUDITED)
MORGAN STANLEY SMITH BARNEY LLC CONSOLIDATED STATEMENT OF FINANCIAL CONDITION AS OF JUNE 30, 2017 (UNAUDITED) ******** MORGAN STANLEY SMITH BARNEY LLC CONSOLIDATED STATEMENT OF FINANCIAL CONDITION June
More informationJPMorgan Chase Bank, National Association $6,970,000 Certificates of Deposit Linked to the J.P. Morgan ETF Efficiente DS 5 Index due January 29, 2021
Disclosure supplement To disclosure statement dated September 21, 2012 and underlying supplement no. CD-6-I dated December 7, 2012 JPMorgan Chase Bank, National Association $6,970,000 due January 29, 2021
More informationCapital Markets Section 3 Hedging Risks Related to Bonds
Πανεπιστήμιο Πειραιώς, Τμήμα Τραπεζικής και Χρηματοοικονομικής Διοικητικής Μεταπτυχιακό Πρόγραμμα «Χρηματοοικονομική Ανάλυση για Στελέχη» Capital Markets Section 3 Hedging Risks Related to Bonds Michail
More informationInterntional Conference On Business Management And Economics STUDY OF LIQUIDITY RATIOS OF BANKS OPERATING IN INDIA. Jaimin Patel
STUDY OF LIQUIDITY RATIOS OF BANKS OPERATING IN INDIA Jaimin Patel ABSTRACT: The major role of banks is to collect money from the public in the form of deposits and then along with its own funds to serve
More informationPursuing the Development of a Central Clearing Infrastructure for CDSs
Pursuing the Development of a Central Clearing Infrastructure for CDSs Takeshi Hirano Head, Strategic Planning, Clearing & Settlement Tokyo Stock Exchange, Inc. This information has been written according
More informationJohn Gregory, Central Counterparties: Mandatory Clearing and Bilateral Margin Requirements for OTC Derivatives
P1.T3. Financial Markets & Products John Gregory, Central Counterparties: Mandatory Clearing and Bilateral Margin Requirements for OTC Derivatives Bionic Turtle FRM Study Notes By David Harper, CFA FRM
More informationCHAPTER 29 DERIVATIVES
CHAPTER 29 DERIVATIVES 1 CHAPTER 29 DERIVATIVES INDEX Para No TOPIC Page No 29 Introduction 3 29 1 Foreign Currency Option 3 29 2 Foreign Currency Rupee Swaps 4 29 2 1 SWAPS 5 29 2 2 Currency Swaps 5 29
More informationPutnam 529 for America SM
Putnam 529 for America SM Financial Statements For the year ended June 30, 2015 A 529 college savings plan Sponsored by the State of Nevada, acting by the Board of Trustees of the College Savings Plans
More informationRegulatory Landscape and Challenges
TITLE: Regulatory Landscape and Challenges AUTHOR: Adrian Orr Chief Executive EVENT PRESENTATION: September 2012 PG 2 Overview Significant regulatory and legislative reform globally: banking, insurance,
More informationFIN 683 Financial Institutions Management Hedging with Derivatives
FIN 683 Financial Institutions Management Hedging with Derivatives Professor Robert B.H. Hauswald Kogod School of Business, AU Futures and Forwards Third largest group of interest rate derivatives in terms
More informationFederated Strategic Value Dividend Fund
Statement of Additional Information December 31, 2017 Share Class Ticker A SVAAX C SVACX Institutional SVAIX R6 SVALX Federated Strategic Value Dividend Fund A Portfolio of Federated Equity Funds This
More informationThe Effects of OTC Derivative Clearing on Macroeconomic Stability
John Carroll University Carroll Collected Senior Honors Projects Theses, Essays, and Senior Honors Projects Spring 2013 The Effects of OTC Derivative Clearing on Macroeconomic Stability William Butler
More informationIntroduction to credit risk
Introduction to credit risk Marco Marchioro www.marchioro.org December 1 st, 2012 Introduction to credit derivatives 1 Lecture Summary Credit risk and z-spreads Risky yield curves Riskless yield curve
More information(each, a Fund and collectively, the Funds )
BLACKROCK FUNDS V BlackRock Core Bond Portfolio BlackRock Credit Strategies Income Fund BlackRock Emerging Markets Bond Fund BlackRock Emerging Markets Flexible Dynamic Bond Portfolio BlackRock Emerging
More informationMERRILL LYNCH GOVERNMENT SECURITIES INC. AND SUBSIDIARY (S.E.C. I.D. No ) CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 2009 (UNAUDITED)
MERRILL LYNCH GOVERNMENT SECURITIES INC. AND SUBSIDIARY (S.E.C. I.D. No. 8-38051) CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 2009 (UNAUDITED) MERRILL LYNCH GOVERNMENT SECURITIES INC. AND SUBSIDIARY CONSOLIDATED
More informationtable a timing, composition and size of the federal reserve s large-scale asset purchase programmes
Box 5 implementation of the Federal The Federal Reserve System embarked on a series of large-scale asset purchase programmes soon after the bankruptcy of Lehman brothers. These quantitative easing programmes
More informationRBC Fixed Income Funds Prospectus
RBC Fixed Income Funds Prospectus July 25, 2018 RBC Short Duration Fixed Income Fund Class I: RSDIX Class A:* RSHFX RBC Ultra-Short Fixed Income Fund Class I: RUSIX Class A:* RULFX * Formerly, Class F
More informationOver the past five years, over-the-counter (OTC)
The OTC derivatives markets after financial reforms Cosmina Amariei is an ECMI Research Assistant and Diego Valiante is a Research Fellow and Head of Capital Markets Research at the Centre for European
More informationResearch Note. Asia-Pacific Derivatives Survey. April 2019
April 19 Research Note In anticipation of ISDA s 34th Annual General Meeting in Hong Kong, ISDA conducted a survey of derivatives markets in the Asia-Pacific region. The survey reveals that market participants
More informationMERRILL LYNCH GOVERNMENT SECURITIES INC. AND SUBSIDIARY
MERRILL LYNCH GOVERNMENT SECURITIES INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEET AS OF DECEMBER 29, 2006 CONSOLIDATED BALANCE SHEET AS OF DECEMBER 29, 2006 (Dollars in Thousands, Except Per Share Amount)
More informationMERRILL LYNCH PROFESSIONAL CLEARING CORP. (S.E.C. I.D. No ) BALANCE SHEET AS OF JUNE 29, 2007 (UNAUDITED) * * * * * * *
MERRILL LYNCH PROFESSIONAL CLEARING CORP. (S.E.C. I.D. No. 8-33359) BALANCE SHEET AS OF JUNE 29, 2007 (UNAUDITED) * * * * * * * MEMBERS NEW YORK STOCK EXCHANGE, INC. AND OTHER PRINCIPAL U.S. EXCHANGES
More informationMonetary and Economic Department Triennial and semiannual surveys on positions in global over-the-counter (OTC) derivatives markets at end-june 2007
Monetary and Economic Department Triennial and semiannual surveys on positions in global over-the-counter (OTC) derivatives markets at end-e 27 November 27 Queries concerning this release should be addressed
More informationTrading motivated by anticipated changes in the expected correlations of credit defaults and spread movements among specific credits and indices.
Arbitrage Asset-backed security (ABS) Asset/liability management (ALM) Assets under management (AUM) Back office Bankruptcy remoteness Brady bonds CDO capital structure Carry trade Collateralized debt
More informationProspectus. Access VP High Yield Fund SM
Prospectus MAY 1, 2018 Access VP High Yield Fund SM Like shares of all mutual funds, these securities have not been approved or disapproved by the Securities and Exchange Commission nor has the Securities
More information