With almost everything turning lower this week under “dollar” pressure, it is imperative to keep in mind the apex asset class. In 2007, it was the ABX indices and various mortgage related structures that signified the how far along everything was; in this cycle it is clearly corporate credit. The disarray starts in the riskiest pieces and then moves inward [...]
Stocks may be ignoring the “dollar” and liquidity more broadly (at least as far as repurchases are concerned) but the continued stress in the eurodollar world has had an accumulating effect in some places. Primarily that has been shown in the once-thriving junk space, including more illiquid “products” like leveraged loans, which has continued in disfavor more recently. The shift [...]
Risk evaluation, at the systemic level, for derivatives in banking is focused on credit risk as the primary measure. As I laid out last week, that is the wrong approach since defaults in derivatives are not the primary risk. In the example of John’s Hopkins Hospital (JHH) and its interest rate swaps with JP Morgan and Goldman Sachs, the primary [...]
So much of bank reporting, accounting, and regulation are directed toward quantifying risks on an individual and systemic basis. This introspection can be very comforting from certain perspectives, particularly since so much of it is wrapped in careful consideration. In the figures on derivatives exposures in the banking system, the Office of the Comptroller of the Currency (OCC) actually does [...]
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