Talking Point

  • Looking ahead to the 19th century to capitalise on an historic market opportunity

    Mark Cernicky, product development manager at Aviva Investor...

    As we enter 2009, let's look ahead and stop asking who or what should take the blame for the current economic mess: sub-prime, credit derivatives, "quants" or even Alan Greenspan's low interest rate policy which inflated housing prices.

    As a result of the application of leverage to poor credit underwriting, investors today have an historic opportunity to earn attractive and .......

    Talking Point 17 December 2008

  • Recovering losses

    Anthony Riem, partner at PCB Litigation, explores how hedge...

    The multi-jurisdictional nature of many hedge funds, their investors and the companies in which they invest can make any associated litigation a daunting prospect. Nonetheless, in the current financial climate parties involved in or with hedge funds are increasingly looking to litigate in order to recoup funds lost to negligence, fraud or simply a falling market.

    A startling example of .......

    Talking Point 5 November 2008

  • New CLO paradigm

    Structures and complexity to suit remaining investor base

    European CLOs are experiencing a shift in structure and complexity in order to meet the demand of investors who are still able to part with cash for the asset class. While industry experts at this week's ESF/IMN conference on 'European CLOs, Structured Credit Products & Credit Derivatives' said that demand for CLOs remains, less leveraged, simpler two-tranche structures are expected .......

    Talking Point 8 October 2008

  • Weighing up CDO tranches using Omega functions

    The application of the Omega function to structured credit i...

    Investing in structured credit products, especially collateralised debt obligation (CDO) tranches, can be an extremely challenging endeavour given the degree of complexities in their risk profile. CDO investments have highly skewed return distributions: either you'll get paid the promised rate, or the debt will default and you'll take a loss (this is termed negative skew).

    Rational investors detest large losses .......

    Talking Point 9 July 2008

  • The Cannes report

    Cautious optimism for recovery, but rating agencies to take a back seat

    Attendees at the Global ABS conference in Cannes this week were cautiously optimistic about the future of the structured credit sector. The majority agreed that a critical point had been reached and a recovery would be subject to confidence being restored in the market and rating agencies, alongside more detailed and accessible data for deals.

    "What this crisis has shown .......

    Talking Point 4 June 2008

  • Reframing the issue

    Whether the market can rethink its approach to the complexit...

    Since the sub-prime summer of 2007, the credit market has posed a number of challenges. The impact has been powerful and the ramifications are very much being felt. The street is littered with the heads of the fallen, from junior analysts to bulge-bracket ceos.

    It is often said that, while success has many parents, failure is an orphan – which .......

    Talking Point 27 February 2008

  • The devil in derivatives processing

    Full-cycle exposure management is discussed by Frank Reiss,...

    The OTC derivatives market continues its meteoric surge. Bank for International Settlements statistics show that notional amounts in all OTC derivatives classes grew a record 135% in the first half of 2007 compared to the second half of 2006, to leave some €354trn outstanding. However, the global OTC derivatives market is sitting on a timebomb caused by extremely low levels .......

    Talking Point 20 February 2008

  • Confidence boost

    Data transparency and standardisation is discussed by Marco...

    Clearly the securitisation market is set to change. The European Securitisation Forum's (ESF) 2008 issuance forecast projected total issuance at €272bn, a 41% reduction in issuance volume from 2007. A major impact has been the global market turmoil.

    The global crisis has highlighted a very important fact that banks operate globally. Contagion rooted in US lending practices spread beyond its .......

    Talking Point 13 February 2008

  • Far more than just a spreadsheet

    Enterprise analytic and trade-capture systems are discussed...

    Question: Don't you think it is time financial market professionals stop treating Excel like a tactical solution and embrace it as an enterprise analytic and trade- capture system?

    Frankly, there is quite a bit more to it than simply installing Excel from the Microsoft Office 2007 CD on every desktop. Speed of development, speed of processing and compliance-related auditing must .......

    Talking Point 6 February 2008

  • Liquidity matters

    Sustaining liquid markets in a credit crunch environment is...

    The challenges faced by the structured credit market in 2008 are varied, but many come back to basic forms of liquidity. For structured credit, that liquidity matters across three major areas: funding of the structured vehicle; pricing and liquidity of the structure's embedded credit names; and liquidity of trading in the CDS of the underlying credit names.

    As has already .......

    Talking Point 30 January 2008

  • Gaining momentum

    Proactive portfolio reconciliations are discussed by Henrik...

    OTC derivatives trading volumes continue their extraordinary growth across asset classes. The escalating volumes, complexity of structures and increasing number of counterparties have presented new and urgent challenges to operations as well as counterparty risk management.

    During the past year, portfolio reconciliation has gained much attention. The sub-prime credit crisis has heightened awareness about the importance of reconciling trade populations .......

    Talking Point 23 January 2008

  • Taking control

    The need for flexible standards within derivatives processin...

    Everywhere you look at the moment in the financial sections of papers there is an unofficial league table of which institution has written off the most money. This isn't a prize organisations are fighting to win.

    However, fund managers are concerned about their current rankings and how far some of them are slipping behind hedge funds, due to a perceived .......

    Talking Point 16 January 2008

  • Credit 101

    The fundamentals of risk assessment are discussed by Jane Kl...

    Much has been written over the past few months about the unravelling of the sub-prime mortgage market and the credit crisis which followed on its heels. With lots of finger pointing, anyone and everyone associated with the home finance industry or the credit markets that created this mess has been assigned some portion of the blame:

    1) mortgage lenders for .......

    Talking Point 9 January 2008

  • CDO management as nature intended

    Applying Mother Nature's laws to the jungle of CDOs may help...

    The art of effectively managing CDOs in these turbulent markets is becoming more complex by the day. Adjustable subordination, which allows managers to replace credits while dealers simultaneously adjust their hedges, means considerable leverage – leverage of credit picking skills that is.

    Lately one would expect to see many substitutions in the underlying portfolio, especially for a deal that is .......

    Talking Point 19 September 2007

  • Diversification, where art thou?

    Cross-market correlation is discussed by Anu Munshi, a partner at B&B Structured Finance

    There was a time, not so long ago, when it was relatively easy to observe patterns in markets and to diversify one's investments away from those patterns. Today, not only has the negative correlation between equity and fixed income broken down, but in certain periods, it has inverted to positive correlation.

    Consequently, in the search for yield and diversification, investors .......

    Talking Point 1 August 2007

  • CDS focus

    Default swaps and implied write-downs key talking points at Barcelona

    CDS was a dominant theme in the CDO panels at this week's Global ABS conference in Barcelona, thanks to recent CDS activity on UK non-conforming RMBS names and the publication of ISDA's CDS on CDOs standard terms supplement last week.

    Indeed, the participants in the first of Monday's CDO panels discussed various issues arising from CDS documentation. Dean Naumowicz from .......

    Talking Point 13 June 2007

  • New frontiers

    More Canadian fund managers to enter the CDS market and utilise new strategies

    The investor base for Canadian credit derivatives is set to rise as more fund managers look to enter the market. One such fund is State Street Global Advisors (SSgA) Canada, which is soon expected to use credit default swaps for the first time in its Canadian investment portfolios.

    "Our active mandates allow us to use credit default swaps and the .......

    Talking Point 30 May 2007

  • Keeping tabs

    Subordinated investors mindful of key-man risk

    The performance of a CDO portfolio is, to a certain extent, dependent on the expertise and skill sets of an individual or a team. So it is natural that some investors will take into account key-man risk when making their investment decisions.

    However, investors should be mindful that the departure of key personnel from a CDO manager does not necessarily result .......

    Talking Point 23 May 2007

  • Troubling times

    Sub-prime contagion may be contained, but investors expect further volatility

    The US housing market's turmoil and how it will affect the wider financial markets is a concern. Though many believe its impact is limited to the sub-prime sector, structured credit investors still need to be vigilant, as it may take time before all the problems are fully recognised.

    The market is still awaiting the catalyst that will cause a change in the .......

    Talking Point 16 May 2007

  • Looking to the future

    Buy-side firms are holding off from entering the credit futures market, but are watching it closely

    The failure of credit futures volumes to take off on Eurex is both an indication and a cause of the product's hitherto strongest advocates, fund managers, to delay entering the market. While managers may not now view futures as a current priority, they still suggest that credit futures will become more important and the market requires monitoring.

    Mario Hooghiemstra, fund .......

    Talking Point 9 May 2007

  • Happy to succeed

    Investors are sanguine over succession issues

    Succession events can result in wild swings in CDS spreads and the cancellation of contracts. However, many structured credit investors feel there is less to fear now than previously.

    Asset managers are watchful of succession events as many view them as a market idiosyncrasy that should not be present. Many view them as a technicality where investors can make or .......

    Talking Point 25 April 2007
×