liquidity

Central Clearing Design

If you had to design a central clearinghouse for transactions in financial markets, what size of guarantees should be offered? And what percentage fees should be charged? “The central clearing modifies the market,” said Andreea Minca, “because the old network structure [of one-to-one] is changing to a new ‘star’ structure.” Minca is Assistant Professor at the School of Operations Research and Information Engineering at Cornell University and was the sole presenter at the December 6, 2016, webinar on systemic risk and central clearing design to members of the Global Association of Risk Professionals (GARP). Under new US legislation, all over-the-counter […]

Currency Option Trading Strategies

Throughout 2015 currency volatility has been increasing, even among established currencies such as the Swiss franc. Persistent exchange rate volatility can be an especially serious problem for currencies of emerging economies. Central banks often intervene by using foreign exchange reserves to purchase and sell foreign currency directly in the spot market. This relies on the continuous accumulation of foreign exchange reserves, which may be very difficult for emerging economies. How, then, can the central banks of such nations best manage currency fluctuations? In 2007-8, when the Colombian peso exchange rate was volatile, the Colombian central bank tried various strategies in […]

“Deal With It”

When it comes to technology advances in the fixed income markets in Canada, “peer-to-peer still needs some work,” said Robert Pemberton, Head of Fixed Income at TD Asset Management. His company’s client base “runs the gamut from retail right through to large investors.” Approximately two and a half million are mutual fund clients. He was the third of three panellists at a September 18, 2015, luncheon sponsored by the CFA Society Toronto, and held at the Toronto Board of Trade. Participants were commenting on regulatory changes in the fixed income markets announced the day before. Canadian Securities Administrators (CSA) will […]

“A Step in the Right Direction”

“The new regulation is a solid step in the right direction,” said Steve Thom, Managing Director at RBC Capital Markets, referring to the September 17 announcement by Canadian Securities Administrators (CSA) on a new reporting system. “The new regulation will increase price transparency, which is important for investors to be able to make more informed decisions. This is a good thing,” said Thom, “but the big thing is size.” He was the second of three panellists at a luncheon, sponsored by the CFA Society Toronto on September 18, 2015, to discuss changes in the fixed income markets. However, “full size transparency would […]

Fairness in Fixed-Income Markets

What are the essential building blocks of market integrity? Information, and fair access to that information. Transparency, but not onerous transparency. “There was a lack of fixed-income data, and large investors had better access to data,” said Ruxandra Smith, Senior Accountant at the Ontario Securities Commission (OSC), the first of three speakers at a luncheon sponsored by the CFA Society Toronto on changes in the fixed income markets in Canada. The event was held at the Toronto Board of Trade on September 18, 2015. Smith was referring to hot-button issues identified in the April 2015 report on the Canadian fixed […]

Is it OpRisk? or Business Risk?

Operational risk has figured prominently in the business news this summer:  a lightning storm destroyed cloud data stored by Google, and a cyber-hack of dating website Ashley Madison breached confidentiality of 33 million accounts. Are companies addressing operational risk the best way possible? What is called operational risk may in fact have its roots in business risk, according to Mike Finlay, Chief Executive of RiskBusiness International. He was the first of two speakers at a webinar on operational risk held on August 27, 2015, sponsored by the Global Association of Risk Professionals. For example, the 2011 Fukushima Daiichi disaster in […]

3 Steps to Liquidity Compliance

Are you scrambling to adjust to new reporting expectations for liquidity risk? Getting good data is key, but “you have to get it right and on time,” said Pierre Mesnard, Director Solutions Specialist at Moody’s Analytics. He was the third of three presenters on liquidity risk compliance at a webinar on June 25, 2015, sponsored by the Global Association of Risk Professionals. Once you have the data, there are three steps to delivering integrated liquidity compliance and business management, said Mesnard. First, you must ensure all financial instruments at your bank can be adequately modelled in order to generate realistic […]

Liquidity: A Change in Governance

Have you noticed that financial risk managers talk and think differently about liquidity risk, compared to pre-crisis days? The 2007-08 financial crisis was a watershed in the evolution of liquidity management, according to Nicolas Kunghehian, Director Solutions Specialist at Moody’s Analytics. He was the second of three presenters on liquidity risk compliance at a webinar on June 25, 2015, sponsored by the Global Association of Risk Professionals. “Before the crisis, there was only one team dedicated to monitoring and managing liquidity,” Kunghehian said. Liquidity risk was assumed to be small, and the Treasury department was chiefly fine-tuning the profit and […]

An Opportunity To Get Things Right

When it comes to forecasting liquidity risk, does your bank follow best practices? It might be tough to do so, because of a “data conundrum,” said Gudni Adalsteinsson, author of The Liquidity Risk Management Guide – from Policy to Pitfalls. Banks carry out a “retrospective analysis” on data that is “not forward looking.” Adalsteinsson, Head of Global Liquidity, Group Treasury at Legal & General Group Plc, was the first of three presenters on liquidity risk compliance, at a webinar on June 25, 2015, sponsored by the Global Association of Risk Professionals. He praised the Basel III regulation on liquidity risk. […]

Swaps, Before & After

“Historically, there were few, if any, regulatory requirements on swaps … it was effectively an unsecured loan,” said James Schwartz, Of Counsel at Morrison & Foerster. He was the fourth and final presenter at the Derivatives Regulatory Update webinar held on March 31, 2015, sponsored by the Global Association of Risk Professionals. Prior to the Dodd-Frank Act, swaps dealers were self-regulated through the trade association International Swaps and Derivatives Association (ISDA). “It was typical for the two parties to accept a certain amount of uncollateralized exposure to each other in the form of a threshold that varied according to their […]