The case for participating forwards This week we took a deep look at a number of common structured products and their hedge effectiveness. One product stood out in terms of its performance – the unconventional participating forward contract. Traditionally when we look at hedging structures
Teaching computational finance to ordinary mortals. Time sure flies when you are having fun. It’s been 7 years and change since we first started this project as an experiment. An initial dump of class notes for my students dedicated to teaching computational finance that over
The positive correlation stress test When it comes to stress testing market portfolios one idea has been finding increasing traction with risk management teams. The 100% positive correlation stress test. The concept is simple. We opt for a diversified portfolio because we want to reduce
TARF Hedge effectiveness model. This is our second post in the TARF hedge effectiveness series and in the treasury candidates assessment series case. To catch up with the case please see the original TARF case study that defines the client requirement as well as available
Vanilla options TARF and participating forwards. A case study. There are some common questions that repeatedly get posed in my treasury products class about the variations available within exotic derivative instruments. Are these exotic contracts really needed? Who really benefits from selling these exotic products?
Synthetic CDO – The Goldman Mike Burry Big Short Trade Before the 2008 financial crisis the incentive for investors to buy mortgage backed securities was simple. For roughly the same implied credit risk as US sovereign risk you had the option to earn excess returns.
Understanding CMO, CDO and CDS The third part of the Big Short Case Study that traces the origin of the mortgaged backed CMO CDO CDS product sets referenced in the book and the film. The terms stand for Collateralize Mortgage Obligation (CMO), Collateralize Debt Obligation (CDO) and
The community wins at the Nestio Startup Weekend, Karachi. If you need to feel the buzz in Karachi, the Nestio is a good bet to get an instant triple shot of positive vibe, optimism and hope. On any given evening the community tends to be
Big Short Takeaways for investors and traders – II Part two of our three part series on The Big Short Case Study for value investors and fixed income traders. In our first post we reviewed the context of the book, characters and the Credit Default Swap
The Big Short case study. For value investors and portfolio managers. For portfolio management and fixed income students the 2008 – 2009 financial crisis represents a terrific learning opportunity. As I teach portfolio management to Executive MBA students I have started to use a class room