Cardea Partners

Stanford Derivatives Study: Can Hedging Increase Market Value?

Christopher Hunt — Tue, 14 May 2013 14:03:24 +0000

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)

Concerns over LIBOR manipulation raised in 1996

Rex Evans — Tue, 20 Nov 2012 17:51:47 +0000

A special report by CNBC, gives us insight into the beginnings of why LIBOR was used as a benchmark for Eurodollar futures contracts and the concerns raised, as far back as 1996, over the potential for manipulation. Benchmarking the Eurodollar contracts use to be calculated by the CME. In order to create more liquidity, the CME wanted to use LIBOR as the new benchmark. And this is how it all started.

America’s Economy App now in Apple’s App Store

Christopher Hunt — Mon, 27 Aug 2012 18:08:21 +0000

Calling all econ/financial nerds: Pretty good app just released from the US Census Bureau, Bureau of Labor Statistics, and the Bureau of Economic Analysis that highlights many current data points and has a calendar for upcoming data announcements. Also available for Android devices. (WSJ Blog)

Barclays to pay $453 Million Penalty for LIBOR Manipulation Attempts

Christopher Hunt — Wed, 27 Jun 2012 15:19:25 +0000

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)

Our Clients Aren’t ‘Muppets’

Christopher Hunt — Wed, 14 Mar 2012 15:27:58 +0000

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)

Greece Puts ISDA in the News, Swaps as Subterfuge

Christopher Hunt — Tue, 06 Mar 2012 14:27:28 +0000

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.

The Mathematical Equation that caused the Banks to Crash

Rex Evans — Wed, 22 Feb 2012 18:36:08 +0000

How the Black-Scholes equation helped foster the derivatives market and contributed to the banking debacle. (The Guardian/The Observer)

Caveat Emptor on Swaps, Same As It Ever Was

Christopher Hunt — Thu, 26 Jan 2012 21:29:39 +0000

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)

2012 Interest Rate Forecast – Cardea Partners

Christopher Hunt — Wed, 18 Jan 2012 16:51:08 +0000

Our annual take on where SIFMA, LIBORs, Treasury Yields, swap rates, and other market indices will head in the new year.

2012 Interest Rate Forecast – Cardea Partners

The Case Against LIBOR

Christopher Hunt — Wed, 23 Nov 2011 16:39:38 +0000

Interesting article from Bloomberg about the history and plight of LIBOR and the complaints that market participants have levied against the indices that set values for some $360 trillion face of financial assets around the world. Primary concern to me is the fact that perceived credit quality is tied to each bank’s offered rate. Should bank rate submissions be anonymous to the marketplace?