Learning Curve

David Myddelton, professor at Cranfield School of Management, believes regulators should scrap recent accounting changes.

Two weeks ago DW published a Learning Curve about investment grade credit derivatives indices, which looked at calculating and hedging the index.

This article discusses end user concerns regarding the use of the ISDA Master Agreement and looks at some of the benefits.

The huge increase in credit derivatives referenced to asset-backed securities means changes in ABS rules will affect the derivatives markets.

The biggest difference between entering a portfolio of single-name CDS contracts and entering a CDS index contract is the protection premium.

Implied volatility can be viewed as a stock's average expected future realized volatility.

The Modigliani and Miller (M&M) theorem on capital structure is among the most important contributions to the theory of corporate finance.

Credit was the last major traded asset class not to have a liquid option market.

International Accounting Standard 39 requires all financial assets and liabilities, including derivatives, to be measured depending on their classification at either fair value, or amortised cost so as to record a constant effective yield.

In first-to-default trades investors earn, or pay, premium to sell, or purchase, protection on a basket of credit default swaps, which terminates after the first credit event or fixed term of typically five years if there are no credit events.

In broad terms, counterparties permitted to engage in OTC derivatives with French funds must be alert to two broad categories of issues: (i) the legal capacity and authority of the relevant type of French fund to enter into the particular type of derivative and (ii) compliance with the provisions of French Decree 89-623 applicable specifically to OTC derivatives with French funds.

Two strong investment themes have emerged in Asia during the last few months.