Options
Knock-on FX
Many banks are now including a credit charge in swap and forward transactions, while increased volatility has upped the cost of options. At the same time, the financial crisis has sparked a suspicion of complex products. How are corporate hedgers and…
Opportunity knocked
Tricky market conditions in inflation volatility, exacerbated by dealers’ structural hedging activity around 0% year-on-year inflation floors, have created a market rife with opportunities. But few clients are taking advantage. Mark Pengelly reports
Simulations with exact means and covariances
Attilio Meucci presents a simple method to generate scenarios from multivariate elliptical distributions with given sample means and covariances, and shows an application to the risk management of a book of options
Less than zero
A drop in inflation expectations last year sent dealers scrambling to hedge their exposures to 0% floors embedded in structured products, causing a massive dislocation in the inflation swaps market. Have dealers now covered their exposures? By Alexander…
Smile dynamics III
In two articles published in 2004 and 2005 in Risk, Lorenzo Bergomi assessed the structural limitations of existing models for equity derivatives and introduced a new model based on the direct modelling of the joint dynamics of the spot and the implied…
Fit for forex
A variety of online trading and analytics platforms are being offered by banks to their clients. Risk looks at the functionality and benefits of some of these systems. By Ryan Davidson
Smile dynamics III
In two articles published in 2004 and 2005 in Risk, Lorenzo Bergomi assessed the structural limitations of existing models for equity derivatives and introduced a new model based on the direct modelling of the joint dynamics of the spot and the implied…
Nymex considers lawsuit against Optionable
The New York Mercantile Exchange (Nymex) may take legal action against Valhalla, NY-based brokerage firm Optionable, the exchange’s chief executive officer James Newsome announced this week.
Broker suffers after BMO commodity losses
US commodity derivatives broker Optionable saw its shares plummet again today after Bank of Montreal, its most important customer, said it would suspend their relationship.
Taking stock
Stock options are losing favour as a method of remuneration. Chicago-based PeoplesEnergy, for one, is to stop offering them altogether. And the onset of new USaccounting rules could well lead others to follow suit. By Paul Lyon
NAB to lose up to A$180 million on unauthorised FX options trades
National Australia Bank (NAB) is set to lose up to A$180 million ($140 million) from unauthorised foreign exchange option trades, despite efforts to improve its operational risk management in the past couple of years.
Profiting from gas prices
Natural Gas
Selling risk at a premium
Option strategies
US foreign exchange dealers revise operational risk standards
The Foreign Exchange Committee, a 20-dealer industry liaison group to the New York Federal Reserve Bank, has made new recommendations for the exercise of in-the-money foreign exchange options in a revision to its 1996 forex operational risk best…
Real option valuation and equity markets
Many non-financial assets can be viewed as ‘real options’ linked to some underlying variable such as a commodity price. Here, Thomas Dawson and Jennifer Considine show that the stock price of a well-known electricity generating company is significantly…
India could allow foreign currency-rupee options by April
The Reserve Bank of India (RBI) could allow banks to offer foreign currency-rupee options to corporate clients by April, according to a bank official.
Copula vulnerability
Counterparty credit risk
Not just a quick fix
Real options are an accepted risk management technique in the energy sector. Kevin Foster takes a look at how are they being used and what factors are affecting their development and implementation