Warren Buffett famously called them financial weapons of mass destruction. In the world of derivatives, there has probably never been so much devastation as was evident in the aftermath of the collapses of Fannie Mae, Freddie Mac and Lehman Brothers. The disappearance of one of the most significant players in the derivatives market – Lehman – was never going to be painless. Yet the implications for corporates who had Lehman as a counterparty in their hedges, alongside the chaos in the CDS market triggered by three of the biggest defaults ever...Read more
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Inflation has been rising for some time, and with governments pumping hundreds of billions of dollars into the global financial system, there is plenty more inflationary pressure in the pipeline. Yet the latest phase of the financial crisis has elevated concerns about a recession or even a depression, which provides a counterbalance of deflationary pressure. Solomon Teague reports.
The rise in volatility in the past year has had a positive effect on institutional and corporate activity when it comes to equity derivatives, helping to counter the drop off in volumes on retail structured products. Innovative pay-off structures are no longer the driver so fringe aspects of the business have grown in prominence, such as equity financing and the hidden asset classes of variance, correlation and dividends. Owen Wild reports.
The credit derivatives market is experiencing the gravest test of its short existence after years of exponential growth. Concerns over the continuing stability and the default of many financial institutions, calls for greater regulation and oversight, rising risk aversion and the deterioration across capital markets are all testing the market’s resolve. Hardeep Dhillon reports.
Although a strong case can be made that the commodity cycle is not over, there is an undeniable weakness permeating most commodities sectors. Meanwhile, the problems of the financial firms, along with the other manifestations of the credit crunch, are putting pressure on commodities. Jean Haggerty reports.
Things seemed to be developing nicely in the leveraged loan credit default swaps (LCDS) market, particularly in the US, where new documentation has been in the works. Yet Lehman’s bankruptcy, and the deepening credit crisis, has turned the market on its head. Jean Haggerty reports.
Asia was unable to withstand the pressures of a haemorrhaging global financial market in 2008. Early hopes of the region decoupling from events in the US were hit on the head, and volatility made its presence felt in Asia as elsewhere in the world. It was all too much for credit but opportunities appeared in other asset classes. Nick Herbert reports.