In this chapter, we will embark on a whirlwind tour of the fascinating world of SCDOs. Much detail must necessarily be omitted in the interest of brevity, but, as noted in Chapter 17, interested readers will have no difficulty pursing SCDOs in more detail on their own. One can ... click here for more details.
In this chapter, the risk premium model and the convenience yield model in commodity futures valuation are highlighted, and the way they can be related. It is shown that these models are mutually consistent, and how they can be used to explain the term structure of commodity futures prices, and ... click here for more details.
There are, however, some fundamental differences between commodity
markets and other markets such as stock, money, interest rate, and exchange
market. This chapter will highlight those differences by outlining
seven operational guidelines that should be part of a firm’s best practices
when trading commodities as well as things an investor should know before
investing in ... click here for more details.
This chapter describes the natural gas market in the United Kingdom from the perspective of gaining an understanding of the drivers of the principal traded commodity, which is physical and financial gas at the national balancing point (NBP). We pay particular attention to the relationship between the fundamentals of production, ... click here for more details.
Since January 1, 2005, an emissions trading system has started in the European Union (i.e., the EU-25, hereafter simply EU) established to provide an economic efficient tool for the abatement of greenhouse gas emissions. The purpose of the emissions trading system is to allow companies to find the cheapest possible ... click here for more details.
Liquidity risk is not a standalone risk. It derives from the management
of all types of exposure, which may result from a firm’s allocation
of assets, from its funding strategy, from collateral policies
or from any mismanagement of risks. Liquidity risk mitigation is
achieved through continuous adjustments of the balance sheet structures;
liquidity management tactics ... click here for more details.
In the presence of liquidity risk, the value of portfolios is no longer a
linear function of the sum of the weighted prices of each asset. The basis
of coherent risk diversification functions, usually represented as
P =
ni
Ai
is no longer true.
However, most portfolio management and asset valuation techniques
are still based on assumptions from ... click here for more details.
Up until 2007, issues relating to asset and liability structure or balance
sheet immunization would essentially boil down to a cost of funding
or loss of opportunity. The liquidity crunch made it a survival issue,
epitomized by the Northern Rock’s bankruptcy whose funding structure
turned unsustainable amid fast-changing market conditions. In the aftermath
of the ... click here for more details.
The above analysis leads to the following results. Liquidity risks arise
from multiple sources, due to the consequence of multiple operational
risks and of their combined effects. Liquidity risks have been identified
as the main cause of failure of Tier 1 institutions that were previously
thought to be ‘too big to fail’ in 2008 ... click here for more details.
