Article in the FT today by Lasse Pedersen and Nouriel Roubini (somewhat accurate predictor of some of our current problems) on regulatory captical and prevention of another crisis. Pedersen and Roubini say that current regulation focuses too much on individual bank risk and does not consider the systematic risk that could be caused by the failure of an individual bank.…
Interesting views in an article by George Soros in today’s FT. Whilst dealing with the current crisis and the difficulty of its remedy in general, Soros spends a little time on short selling and continuing his warnings about CDS contracts and other OTC derivatives.…
The EDM Council has today released its first draft of a Semantics Repository for review by the industry. Its intent is to establish a common meaning for terms used in financial markets and data management in particular. How it is meant to be used and how it fits with other standards such as FpML and MDDL is briefly outlined by the following article.…
Interesting predictions for complex event processing (CEP) in 2009 (click here for link) – sounds like some form of reality is appearing in this area of the market, accelerated by the current financial crisis. Entry of bigger players and usage of LINQ in CEP will be interesting too.…
More flak for the ratings agencies in the FT today with the article "Warning: rating agencies can do you harm", suggesting that agencies have moved from under-assessing risk (and causing financial damage in the process) to now cautiously over-assessing risk (and causing financial damage in the process).…
Concise letter on the continuing debate on fair value accouting to the FT from Hugh Shields, Chief Economics Advisor to the Institute of Chartered Accountants of Scotland.
It seems that most commentators come down positively on the side of fair value accounting from what I have read, with the two main points of:
Don’t blame the messenger Pro-cyclical behaviour is driven by the regulatory calculation based on fair value accounting, not by fair value accounting in itselfA recent paper “The Fair Value Controversy: Ignoring the Real Issue” and survey “Reactions to an EDHEC Study on the Fair Value Controversy” by EDHEC seem to support this view, with only 25% of respondents believing that any amendments are necessary, and 75% believing that changes will only lead to more problems.…
Article on PCMag saying that the spreadsheet is 30 years old. Whilst wishing it a happy birthday, the author, John C. Dvorak, has a good rant about how spreadsheets have been the major weapon in the rise to power of the accountant in business.…
Echoing all of the recent focus on model risk at the RiskMinds event before Christmas (see earlier post), Emanuel Derman and Paul Wilmott have put together “The Financial Modeler’s Manifesto” as their serious but amusing guide to how financial modeler’s must conduct themselves in future.…
Following the ongoing story of Libor diverging from the OIS rate (see earlier post), Risk magazine reports that Libor risks losing its place as a funding benchmark. Spreads against the OIS have tightened recently (see recent article in the FT), but Mustafa Chowdhury, head of US interest rate research at Deutsche Bank in New York, says that Libor is becoming less relevant as a benchmark due to banks accessing other sources of funding such as Federal Reserve Funds.…
Very balanced article in the FT by John Plender on innovation in financial markets, quoting Merton Miller as saying in 1986 that "the major impules to successful financial innovations have come from regulations and taxes". Apart from a good narrative on the current crisis, Plender ends by suggesting that as both taxes and regulation are likely to increase in the near future, it may be unwise to call the death of financial innovation just yet.…
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