In the aftermath of the so-called “perfect storm” we learned to “expect the unexpected”, to watch out for outliers and to factor in “Black Swans”, and now, we can say with a great deal of certainty that new regulations are coming. These regulations will call for more transparency and oversight and force the industry to go back to the basics - from data management to risk management, from trading plain vanilla instruments to trading exotics.  Firms will make a concerted effort to get a consolidated view of their business, not just at the desk level but also at the enterprise level. …read more

Hedge Funds - a useful vehicle for asset mangers looking for portfolio diversification or absolute returns especially when under normal conditions they have little correlation to the broader markets. So it stands to logic that during “abnormal times” they are expected to post losses. Not so in the case of Universa Investments, the $2 billion fund founded by Nassim Nicholas Taleb, former options trader, philosopher, professor and author of “The Black Swan”. …read more

The Bernie Madoff  fallout may or may not  shake the markets now  but its long term consequence will be massive .The precise mechanism of the fraud committed here remains unclear . however this to my mind smacks of the SIV issues  that struck the bond markets a year back . then as SIV’s started falling , the resultant lack of faith in rating agencies brought the wholesale debt markets to a halt with well known consequences . the maddoff episode (consdiering madoff ’s prestige and pedigree) has the potential to do the same for even strong hedge funds .

Purchase cards are relatively speaking a new phenomenon in Cash Management.  These cards are issued to SME / MME corporates to use for settling payments due for purchases.  In effect Purchase Cards are the corporate equivalent to credit cards used by individuals.  Purchase cards today account for only 8% of Cash Management revenues earned by banks in the US Market for 2005 (2006 Cash Management Survey, E&Y). …read more

http://www.silobreaker.com/DocumentClusterReader.aspx?Item=16_914342153

This article contains many truths about quants, and the hijacking of the finance and economics space by engineers and mathematicians, away from the traditional liberal-arts / accounting backgrounds that one earlier saw there.
However it also contains some untruths that are now finding their way into the popular press.

There is no evidence that exchange traded derivatives, and quant engines built around them, had anything to do with this problem. …read more

http://www.guardian.co.uk/business/2008/oct/16/creditcrunch-hedgefunds

A very interesting, and sobering article. As they say “we ain’t seen nothin’ yet”

It all started with the collapse of 2 Bear Stearns funds, and now it appears more failure stories in that space are in the offing.

Unlike Mutual Funds and normal Investment Pools, hedge funds frequently follow shorting based strategies. Given that, there will be as many stories of super-normal profits as well, I would imagine. …read more

What can we reasonably assume about the future (though as nassim taleb say the future is by definition an unknown unknown?)

 
The central bank will be the central regulator in most countries. So investment banks, funds, insurers and much other type of institutions which have historically gone through more relaxed regulators are in for a shock. Capital adequacy rules are going to be there for everyone .In addition the rule types are going to change. …read more

The upheaval in the financial system and the volatility in the indices do not appear to be impacting the business of trading venues. Rather, some of the trading venues (ISE, CME Group etc.) are achieving record trading volumes, the main revenue generation activity for them. The trading venues- business appears to be immune to the financial crisis both in the short-term and the long-term. The impact in the medium-term would largely depend on the speed of recovery in the business activity and the business sentiments. …read more

Analysts the world over are now bullish on Indian market. A steady GDP growth, despite occasional slips and fall and burgeoning IT spend by companies across industry to improve user experience, provide an attractive spectrum for services and solution sectors, so far busy chasing foreign deals. It is time for homecoming. …read more

1. fundementally they wanted to discourage a capital structure arbitarage trade : short the stock , go long the Credit (of any off form, ideally the CDS) . this trade normally is fully hedged and income nuetral . however with one side of equation theoritically garranteed and CDS levels being what they this was almost a oneway trade . essentailly the central bank wanted to through some grit into this trade or any troubled financial instution could and would be a target . uptick rules would slow but not stop this . …read more