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John A Morrison's Blog (194)

What Happened to the Quants in August 2007

In June of 2007, the assets of two funds managed by Bear Stearns were seized and sold by a number of lenders to the funds, including Merrill Lynch. These assets of the BS funds were collateralized debt obligations, or CDOs, Many of the CDOs the Bear Stearns funds had were backed by mortgage securities.



The Bear Stearns events of the summer of 2007 still looked to the global markets as if the were US specific at that time, it was not until the BNP Paribas issues that the problem… Continue

Added by John A Morrison on February 19, 2009 at 1:11am — No Comments

The UK Treasury Select Committee Hearings - Its All about Stress Testing

Really, it is all about Stress Testing, Financial Predictive Analytics; its about time the Banking System faced the issue square in the face and got on with it, they have taken long enough with 'delay worry and expense'! See this essay discussing the hearings.

http://bankingeconomics.blogspot.com/2009/02/treasury-select-committee-hbos-and-rbs.html

Comments welcome.

Added by John A Morrison on February 12, 2009 at 9:30am — No Comments

W R A P 2.0 - Wiki Risk Assessment Process 2.0 Collaborative Risk Transperency

The WRAP Approach



The WRAP creates a global community of expert modelers and modeling resources dedicated to unlocking today’s credit and structured asset markets through an open, transparent and collaborative process for valuing and risk-assessing non-government credit securities and related instruments and contracts such as CDOs and credit derivatives.



By tapping the ‘Wisdom of the Crowd’, we believe that the WRAP can introduce a level of transparency and peering to… Continue

Added by John A Morrison on February 12, 2009 at 3:03am — No Comments

Interoperability: the great enabler: The Financial Times by Michael Schrage

The writer researches the economics of innovation at MIT’s Sloan School and at Imperial College’s Business School



Here is a quote from the article;-



" .... as interoperability be­comes the technical locus of innovation strategy worldwide, regulators may feel compelled to enshrine, loosen or shatter market standards. Interoperability standards can create, or destroy, innovation oligopolies and monopolies. Interoperability represents a challenge to competition policies in… Continue

Added by John A Morrison on February 12, 2009 at 2:42am — No Comments

The American Chamber of Commerce in Luxembourg - "Shaping the Future of Regulation"

The American Chamber of Commerce in Luxembourg (AMCHAM) - "Shaping the Future of Regulation"



The Financial Services Committee of AMCHAM and the Luxembourg Association for Risk Management Professionals (PRiM) are jointly organizing a top class seminar on the subject of "Shaping the Future of Regulation" on March 10, 2009, at 18:00 at BGL Societé Anonyme, 50, Ave. J.F. Kennedy, L-2951 Luxembourg.



Speakers include Mr. Yves Mersch, Governor of the Banque Centrale du… Continue

Added by John A Morrison on February 12, 2009 at 1:47am — No Comments

The Argument for Community Open Source in Financial Predictive Analytics.

The Central Banks, Universities, Software Vendors, individual developers and consulting firms are constantly publishing papers in the public domain about how to do modern risk management, most of these model risk management in R. There is no question that in general black box proprietary closed source predictive analytics have failed the banking industry and thus society through this crisis period. The detailed evidenced argument that the manner of implementing risk analytics is already done by… Continue

Added by John A Morrison on February 8, 2009 at 10:39pm — No Comments

Seminar: Centre for Financial Markets (CFM) Smurfit School of Business: University College Dublin

The paper is to be given by Massimo Guidolin (University of Manchester):



"Regime Shifts in Empirical Pricing Kernels: A Mixture CAPM"



Thursday February 12 between 2-3.15pm at the Smurfit School of Business, Carysfort Avenue, UCD. The venue for the paper is Room N203.



Details for the speaker are available at…



Continue

Added by John A Morrison on February 8, 2009 at 9:00pm — No Comments

Basel II - Flawed and Procyclical or Just Mis-understood and Un-Implemented?

What are we doing when we are modelling risk from a banking supervision perspective?



Consider the capital adequacy ratio of the banks in a simple arithmetic equation; CAR = (Tier 1 capital + Tier 2 capital)/Risk-weighted assets, OK? Government policy strategies increase bank solvency, but in different ways. Capital injections increase the numerator of the CAR, asset guarantees decrease the denominator, and asset purchases decrease the denominator. That is focusing on Pillar One of… Continue

Added by John A Morrison on February 7, 2009 at 8:30pm — 1 Comment

BarCampBankLondon2

I would really like to go to this event but I cannot unfortunately, I think the idea is just what is required right now;-


http://barcamp.org/BarCampBankLondon2

I must say the version to be held in Edinburgh in March seems to have its priorities in the right order, focussed on the Scotland / Ireland rugby match!

Added by John A Morrison on February 5, 2009 at 4:42am — No Comments

Financial Times Lex Column - Is structured finance dead?

Is structured finance dead? The market is certainly on life support: issuance of collateralised debt obligations and their synthetic equivalents has fallen from a peak of more than $350bn worldwide in the first quarter of 2007, according to Creditflux, to virtually nothing.



Securitisation remains a useful tool to spread risk but, if market participants cannot identify who is at risk and the extent of the risk they are exposed to – or would like to pass on – it is no wonder the system… Continue

Added by John A Morrison on February 5, 2009 at 2:49am — No Comments

The Forrester Blog - Is BI recession Proof?

Is the BI industry recession proof, or is the next soft-economy shoe--or heavy hammer--poised to drop on this segment’s unsuspecting heads? To some extent, I suspect that BI’s relative, perhaps short-lived, immunity from tough times is due to its use as a “recession-busting” tool for identifying areas to cut costs, consolidate operations, and boost revenues.…



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Added by John A Morrison on February 5, 2009 at 1:45am — No Comments

European Central Bank (ECB) Working Paper - INFINITE-DIMENSIONAL VARS & Factor Models

Vector autoregressive models (VARs) provide a flexible framework for the analysis of complex dynamics and interactions that exist between variables in the national and global economy. However, the application of the approach in practice is often limited to a handful of variables which could lead to misleading inference if important variables are omitted merely to accommodate the VAR modelling strategy. Number of parameters to be estimated grows at the quadratic rate with the number of… Continue

Added by John A Morrison on February 5, 2009 at 1:30am — No Comments

TOGAF Version 9 -- The Open Group Architecture Framework

Launched last week, The Open Group Architecture Framework (TOGAF) is a framework - a detailed method and a set of supporting tools - for developing an enterprise architecture. It may be used freely by any organization wishing to develop an enterprise architecture for use within that organization.

http://www.opengroup.org/architecture/togaf9-doc/arch/

Added by John A Morrison on February 5, 2009 at 1:28am — No Comments

New Paper - New recipes for estimating default intensities

Alexander Baranovski, Carsten von Lieres and André Wilch (all WestLB AG)



This paper presents a new approach to deriving default intensities from CDS or bond spreads that yields smooth intensity curves required e.g. for pricing or risk management purposes. Assuming continuous premium or coupon payments, the default intensity can be obtained by solving an integral equation (Volterra equation of 2nd kind). This integral equation is shown to be equivalent to an ordinary linear… Continue

Added by John A Morrison on February 5, 2009 at 1:08am — 1 Comment

New Research Technical Paper - "NowCasting" Irish GDP - Central Bank of Ireland

PLEASE SEE THE REFERENCES IN THE COMMENTS BELOW TO GET THE WHOLE STORY

THIS IS A 'BLEEDING EDGE' "TECHNOLOGY" DEVELOPED BETWEEN BRUSSELS AND DUBLIN; BUT DREAMED UP BY THE ECB; viz;-

Recent studies undertaken by the ECB show that the so-called mixed frequency models,…

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Added by John A Morrison on February 5, 2009 at 1:00am — 9 Comments

REvolution Computing Makes High Performance ‘REvolution R’ Available For Download

REvolution Computing Makes High Performance ‘REvolution R’



Available For Download







New Haven, CT – January 28, 2009 – REvolution Computing, a leading provider of open source predictive analytics solutions, today announced that it has made a public version of its commercial grade REvolution R program available for download from its website. REvolution R is REvolution Computing’s distribution of the popular R statistical software, optimized for use in commercial… Continue

Added by John A Morrison on January 29, 2009 at 3:00am — No Comments

A Layered Integrated Enterprise Solution Architecture for Financial Predictive Analytics

I think that as an aspect of governments taking equity or preference interest in the banks whilst simultaneously acting as 'counterparty of last resort' in the structured products and credit derivatives markets, a situation which is simply not, even medium term, tenable; the governments should insist that the banks implement modern systems which will support financial analytics in an holistic sense. Systems holistic enough that the banks' boards of management cannot use the 'we were not told'… Continue

Added by John A Morrison on January 27, 2009 at 10:00pm — No Comments

Bank of America / MIT Future Banking Blog

Just a beautifully presented and very interesting blog, in my view.

http://futurebanking.bankofamerica.com/

Added by John A Morrison on January 26, 2009 at 5:30am — No Comments

Scenario Based Enterprise Capital Models - Why Banks are Under-Capitalized

I understand this is paper 2 in a series of 3; paper one is being completed by Professor McNeil and will be a the key contribution to a REvolution in thinking about Economic Capital which does seem to progressing right now.



Abstract: (of the paper referred here)

The concept of economic capital is clear; it is the capital charge that a financial institution (bank or insurance company) requires in order to limit the probability of bankruptcy to a given confidence level over a… Continue

Added by John A Morrison on January 26, 2009 at 5:30am — No Comments

Basel II in Switzerland 9th January 2009 update

In Switzerland the EBK (www.ebk.admin.ch) is entrusted with (Basel II) implementation. Under its leadership a mixed national working group, made up of representatives of all relevant interest groups in the Swiss financial industry, is working out the appropriate Swiss legal regulatory standards. In Switzerland all the menu approaches offered by Basel II are being implemented, and are therefore in principle available to every institute.…



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Added by John A Morrison on January 26, 2009 at 5:30am — No Comments

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