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Reform in the OTC derivatives market

In 2010, the European Commission (EC) made a number of proposals concerning reform in the over-the-counter (OTC) derivatives market. The EC is of the opinion that OTC derivatives contributed to the worldwide contagion of the crisis in the American housing market. The results of the reform should deliver a safer and more effi cient OTC market in order to reduce these systemic risks.

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Basel III is forcing banks to innovate

New liquidity requirements demand both stable financing and attractive products

The financial crisis emphasizes the capital and liquidity risks in the financial world. The new Basel III framework was published in December 2010 in order to control these risks better. While Basel II is focused chiefly on counterbalancing losses by capital buffers, Basel III goes a step further. In addition to stricter capital requirements, the new directives of Basel III impose more explicit requirements on the liquidity position of banks. The combination of these requirements in particular makes it more difficult for banks to find the optimum balance sheet ratios.

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Basel III: the price of a stable banking sector

Implications of banking regulation for banks and their corporate clients

The BIS’s new capital requirements for banks, also known as Basel III, draws the attention of various stakeholders. It’s not only the banks that are keen to take note of these additions to the Basel II Accord of June 2006, but their professional clients also want to understand the implications for them. This article provides some suggestions on how to cope with the consequences of Basel III.

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How to value a cross-currency swap

Since the first transaction in 1981 between the World Bank and IBM, the market of cross-currency swaps has grown rapidly. It represents, according to the Bank of International Settlements, an outstanding notional amount of USD 16,347 billion as per June 2010. In this article we will discuss how cross-currency swaps work, and how to value them.

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How do you value a credit default swap?

Warren Buffet once called these products 'weapons of mass destruction', how do credit default swaps work?

Multi-billionaire Warren Buffet once called these products 'weapons of mass destruction', because he thought they were partly responsible for causing the credit crunch. Despite this remark, there is still a buoyant trade in credit default swaps. Here we discuss how they work, and how they are valued.

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