Risk magazine
Pricing options on film revenue
This article illustrates two models for cumulative revenues from films, a time-changed gamma process and a compound Poisson process, and how these models can be used to price options. Don Chance, Eric Hillebrand and Jimmy Hilliard find that while both…
Managing diversification
Attilio Meucci introduces a diversification index that represents the effective number of bets in a portfolio. With this index, based on entropy and constrained principal component analysis, he performs mean-diversification management adjusted for…
Courting attention
While standardised documentation for complex financial products has been in place for some time, dispute resolution for those products is often performed on an ad hoc basis. But a new initiative looking at the possibility of establishing a specialised…
A new master
China took another significant step forward in the development of a unified single master derivatives contract in March with the launch of the revised Nafmii Master Agreement. Chin-Chong Liew, Simon Zhang and Chris Zhao of Linklaters look at the…
Can the centre hold?
Despite the inevitability of tighter and more intrusive regulation, David Rowe argues this alone will not prevent future financial crises as long as 'too big to fail' remains an issue
The fast track
Modern trading and risk technology systems are large and complex, but banks are becoming increasingly wary of running into implementation difficulties. As a result, technology vendors are packaging their systems so they are quicker and simpler to get up…
Formula, non
The decision by the French government last year to alter its Livret A inflation-linked savings rate formula introduced huge complexity for banks offering Livret A hedges. However, a further change this year has proven to be the last straw, forcing many…
Raiders of the loss arc
Regulators are looking at ways to remove pro-cyclicality from accounting standards, with some advocating the scrapping of incurred loss models in favour of dynamic provisioning
Out of the comfort zone
US banking supervisors will complete stress tests early this month to determine if the country's largest banks need to hold more capital to withstand a worsening in economic conditions. But industry practitioners raise concerns about the effectiveness of…
Setting global standards
Accounting
An aversion to variance
As volatility spiked in late 2008, variance swaps contributed to huge bank losses, particularly in single stocks. Some dealers have now stopped quoting single-stock variance swaps, while activity in the broader market has been scaled back. Mark Pengelly…
Cutting hedges
Buoyed by a strong local currency and surging commodities prices in recent years, many Russian corporates eschewed derivatives to hedge risks. But with both the rouble and commodity prices plummeting in recent months, it may be time for a rethink…
A serious business
Richard Alderman, Director of Serious Fraud Office, talks to Alexander Campbell
Building a new house
International Derivatives Clearing House, a new clearing service for interest rate swaps, was launched in December. Christopher Edmonds, its chief executive, talks to Ryan Davidson about the venture
Crude but credible
Regulators are warming to the idea of introducing a leverage ratio to limit the excessive build-up of assets on bank balance sheets. But they face an uphill battle to create an internationally consistent measure that addresses differences in accounting…
Lewis ousted from BoA chair
Ken Lewis, chief executive and president of Bank of America, was voted out as chairman of the firm at a shareholders' meeting on April 29.