Interesting study from Stanford GSB about how the introduction of weather derivatives allowed for testing the value of hedging for energy companies, utilities, and other weather-sensitive businesses.  If your business or its intrinsic value benefit from certainty of cash flows, energy costs, currency rates, or rain fall, maybe hedging is for you… (Stanford Graduate School of Business)

read more

While 16 banks submit daily offers for the various tenors of the London Interbank Offered Rates (LIBORs), and the top four and bottom four get thrown out before the remaining eight are averaged, Barclays admitted to attempting to “benefit Barclays’ trading poisitons” by submitting artificially low rates from 2007 to 2009.  Look for more banks to follow suit with settlements.  Barclays CEO Bob Diamond and three others will forego bonuses as well.   (Bloomberg)

read more

Amazing op-ed from resigning Goldman Sachs derivatives director Greg Smith, discussing how the firm’s culture became more about taking advantage of clients as opposed to serving their best interests.  Unlike derivatives desks across the spectrum, we have no “axes” to grind here, we don’t hunt elephants, and we don’t advise our clients to trade in the illiquid exotic derivatives that turned credit underwriting on its head over the past decade.  Greed kills! (New York Times)

read more

Interesting articles about the challenges of over-the-counter (OTC) derivatives documentation, and how the ISDA ’standard’ language (HuffPo) used in some swaps is designed to favor one party.  Also, another lesson learned from Greece: don’t use interest rate swaps and/or cross currency swaps to alter debt-to GDP ratios.   (Bloomberg)  Another few reasons to get independent advice on this stuff, folks.

read more

Op-ed from Barbara Roper, Consumer Federation of America, talking about how the CFTC’s final rules for swap dealer business conduct were softened to benefit swap dealers.  Cardea Partners are independent representatives for anyone, public or private, entering into swaps and options contracts.  And yes, even though such a representative is not mandated for trades with certain parties under certain conditions, the benefit of understanding what you are getting and the quantifiable savings realized with a swap advisor make having one the right choice. (Huffpost)

read more