Learning Curve

The idea that it is possible to purchase a foreign exchange option without paying a premium is so attractive that skepticism would be justified.

In the last two decades, risk management has expanded its role from "in-house police" to a role concentrating on overall portfolio management.

This is the second part of an article on extreme Value-at-Risk. The first part ran in Derivatives Week's March 6 issue.

The analysis of off-market (i.e. non-par) swaps requires a set of discount factors with the effects of regular swap coupon payments removed.

Risk managers are primarily concerned with the risk of low-probability events that could lead to catastrophic losses.

Whilst there has been much debate on the strengths and weaknesses of different ways to estimate value at risk (VaR), there has been relatively little debate on the inherent weaknesses of VaR itself as a risk measure.

The factors that contribute to a bond futures valuation versus the bond curve have different impacts on the future pricing versus the swap curve.

The opening up of the Indian markets has been accompanied by the liberalization of regulations relating to the Indian foreign exchange and money markets.

All weather derivative contracts for trading or speculative purposes should be accounted for at their fair value, with subsequent changes in fair value reported in earnings.

In this week's Learning Curve, we are presenting the Financial Accounting Standard Board's accounting standards for over-the-counter weather derivatives in connection with nontrading activities.

Trading books as well as debt portfolios of banks are exposed to a huge number of factors driving their mark-to-market value.

If financial markets behaved in the way assumed by the Black-Scholes option pricing model, crashes would never happen.