A recent report by the US consultancy Finadium lauded a paper by Professor Bruce Tuckman of the NYU Stern School of Business who wisely cautioned against too severely discouraging the use of derivatives through regulation. The main argument by Prof Tuckman is that derivatives and forwards can provide synthetic positions that have equivalent risk exposures…

I have been doing some work on money market codes of conduct. In my research, I came across a fascinating article on “Anxiety, Overconfidence and Excessive Risk-Taking” by Thomas Eisenbach and Martin Schmalz (FRBNY Staff Report No.71, March 2015). The authors note that it is widely accepted and well substantiated that people tend to systematically…

In a recently published research paper, ‘Fails-to-Deliver, Short Selling and Market Quality’, three academics from Warwick University — Veljko Fotak, Vikas Raman and Predeep Yadav — attempt to measure the impact on market quality of regulatory measures to prohibit settlement failures in the US equity market. It is an excellent piece of practical research and…

Dear consultancy firms, You frequently ‘phone and e-mail me to talk about the repo market. You want to pick my brains. No problem. I would like to pick yours. Occasionally, we have had an exchange of information, not necessarily a fair exchange but enough for me to be able to say that I have learnt…

Risk-averse institutions often limit the amount they are willing to lend against collateral to no more than the market value of that collateral less a haircut. Central banks are no exception. At first glance, the idea of any secured lender taking collateral haircuts seems eminently sensible and, in the case of central banks, characteristically prudent….