Derivatives, the investment bank's old rocket-fuel, which supplied 70% of its revenue growth between 2003 and 2006, are maturing, partly because of more regulation.
Then there are complex derivatives, another juicy investment-banking niche.
Broker-dealers like the former Bear Stearns played an increasingly important role in lending during the bubble years, in the growth of the commercial paper market, structured investment products and derivatives trading.
In addition, banks likely will be forced to put up additional collateral on derivatives transactions and in certain investment vehicles, including those housing pools of securitized assets, if their ratings are cut.
Growth in the derivatives markets and proprietary trading at investment banks has put a premium on technically skilled people like Beguir, especially over M.
This agency would derive its funding from mandatory fees paid by any firm that trades or sells derivatives, securities, bonds, investment advice or commodities contracts.
FORBES: Mary Schapiro's SEC Exit An Opening For Greater Reforms
Harvard and Yale in particular expanded their endowments' investments beyond the traditional bounds of fixed-income and equities and into exotic financial instruments like derivatives, hedge funds and leveraged investment products.
Derivatives and structured products are generally housed in investment banking divisions.
In the case of RBS, the chief executive has to understand not only how to run a retail bank but also how to contain the risks of all those complex derivatives that are created and traded by the investment bank.
According to the Association of Corporate Treasurers, the vast majority of interest rate derivatives involve financial companies, such as banks, investment firms, insurers and hedge funds.
To be clear, I do not know of any specific hedge fund that has implemented this strategy, but it is not a wild stretch to fathom that sophisticated investment firms can use small, illiquid derivatives markets (such as CDS on Greek, Italian or Spanish bonds) to potentially impair the broader global equity markets.
Financial regulation reform is now mostly about debating the Volcker Rule and derivatives, and the carried-interest tax hike on investment partnerships is not part of it.
If banks and investment firms can't use Treasurys and Treasury derivatives like bond futures to tame their balance sheets, their lending to the private sector will be curtailed or priced upward.
The borrowers could be hedge funds, who either are trying to short a stock or scrambling to cover a stock loan that has been called in, or they could be investment houses that need an underlying instrument for a derivatives contract.
Part of the problem is that investment banks may have entered contracts such as swaps or other derivatives that produce risks to the bank that can last 20 years or more.
Ring-fenced banks would also be prohibited from carrying out a range of investment and wholesale banking activities, including the sale of complex derivatives, which are highly complicated contracts designed to hedge borrowers against certain risks but can lead to heavy losses if they go sour.
Private investment group Veriana is launching The Trend Exchange which will offer movie derivatives trading.
Owners don't always understand the risks, which is why even the investment banks that created them are losing billions of dollars on these derivatives.
CNN: Clinton's November 19, 2007, speech on economic challenges
In an amazing disclosure, the 79-year-old investment genius reveals that he and he alone initiates and monitors every derivatives contract on his books, except for some contracts at Berkshire subsidiaries.
FORBES: A Berkshire Profit Center: Derivative Contracts, Managed By Buffett
The losses have spilled from commercial and investment banks that manufactured and sold (or held) the mortgage derivatives now in crisis to the institutions that invested in them or played in the game as well.
If Brazil develops as expected, the derivatives, mortgage-securitisation and corporate-bond markets may become bigger, making investment banking a more balance-sheet-intensive affair.
This will make it more expensive for the bank to raise fresh capital and is bad news for an investment house that is the largest participant in America's market for derivatives.
None of these are really about investment or casino banking, nothing to do with CDOs, CDS and options, derivatives and all.
The global equity derivatives division had already lost heavily last July (as, to be fair, had other investment banks), when the British government unexpectedly changed tax rules so that investment banks could no longer claim tax relief on dividends if shares are held for trading rather than investment.
For instance, there are investment products that protect either principal or income by using hedging strategies involving various combinations of derivatives.
According to an SEC official, the regulators are evaluating whether derivatives are being used by mutual funds and ETFs in ways that are consistent with the protections of the Investment Company Act.
应用推荐