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Monthly Archive for September, 2010

Misprice Is Not A Word

“To Misprice” might be a popular term with economic pundits (this blog author is not immune to its usage) but it is not an English word. So how do we grapple with volatile prices and what they represent in today’s markets?

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This article is a background piece for a recent 24Something video of the US treasury yield curve from the early 1990s through to the 24th of September 2010.

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Inflation is an uneasy issue for most fixed-income enthusiasts, it can be both a cure and an ill to ongoing financing decision: this two-sided blade can have pernicious effects over a security’s yield curve. This post reviews a recent 3 year treasury note auction and potential valuation issues that can occur with an already ‘priced’ in inflation measure.

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Just a short post of a recent Facebook brainstorm session (you can reach the FB page here). The guiding question was: What can rhyme with 24 with twos and fours?

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Where will capital markets take us in the future? Let’s be a bit creative here and think at what the real-estate and mortgage market may look like within a hundred years or so. And then let’s also assess, are we far off from there? Maybe tomorrow is already today. This article is a round-off from my previous two posts: on the Basel-III announcements and potential formarket-determined capitalisation ratios.

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This article explores the potential for pure market pricing of minimum banking capitalisation ratios. In particular, it reviews the track-record of existing commodities exchanges calculation methods, such as CME’s SPAN system in determining safe capital adequacy buffers. The post follows through from the recent BSCB announcement on minimum tier-one capitalisation requirements.

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The powers that be of the Basel Committee on Banking Supervision have now decided: seven is the new golden number. That is a 7% tier-one capitalisation ratio to be phased in by 2018. This will have a significant impact both on bank’s operating models and future earning profiles. Tier-One ratios affects as much a bank’s ability to absorb losses as its ability to earn profit and raise new capital.

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