Category / Publications

Sorry folks March 26, 2014 at 10:18 pm

I’m horrendously busy, and unlikely to be blogging for some weeks. Normal service might be resumed by mid-April, but more likely there will be fewer but hopefully longer posts. Happy Easter

Shameless book plug November 7, 2013 at 8:11 pm

On the Amazon money and markets blog, though, rather than here.

Cheap, cheap September 12, 2013 at 10:22 am

UK readers, and perhaps others (although the postage might be ugly) can get my book at 30% off the RRP, beating Amazon, here. Many thanks to Bill, author of an excellent chapter in the book on the operational aspects of clearing and owner of the OTC space for sorting this out.

The book is out August 9, 2013 at 1:22 pm

I can finally confirm that the book has appeared. OTC Derivatives, Bilateral Trading and Central Clearing was published yesterday, and I have a copy in my hands.

The link is here. say that US publication is 4th September, so I am guessing that the books are chugging their way across the Atlantic now: the link is here. Get that rare unsigned copy while you can…

Sun on wood

(PS I love the re-seller market. There are apparently 3 used copies available for a tenner more than the new price on the day of publication. Mind you, if that was the only screwed up thing about the market in books, I’d be very happy.)

Coming to good bookshops near you soon January 28, 2013 at 6:24 am

My new book, OTC Derivatives: Bilateral Trading & Central Clearing will be delivered to the publisher this week. These roughly 300 pages of goodness should be out in the summer. Just to whet your appetites, here’s the table of contents.


Chapter 1 – Over-The-Counter Derivatives
1.1 OTC Derivatives: Trading And Its Consequences
1.2 The Risks of OTC Derivatives
1.3 The Pre-Crisis OTC Derivatives Market

Chapter 2 – The Counterparty Relationship
2.1 Portfolios and Payment Netting
2.2 Default and Close Out Netting
2.3 Credit Support: Margin and Collateral
2.4 Rehypothecation and Funding
2.5 Novation, Standardisation and Simplification

Chapter 3 – The Valuation and Risk of OTC Derivatives
3.1 Derivatives Valuation Under a CSA
3.2 Estimates of Default Risk and CVA Management
3.3 Counterparty Credit Risk
3.4 The Risks in Credit Support and Procyclicality
3.5 Wrong Way Risks
3.6 Regulatory Capital Requirements for Default Risk

Chapter 4 – The Role of OTC Derivatives in the Crisis
4.1 The Dogs That Barked and The Dogs That Didn’t
4.2 A Very Short History of the Financial Crisis
4.3 Credit Derivatives In The Crisis
4.4 OTC Derivatives and Interconnectedness
4.5 Broader Vulnerabilities

Chapter 5 – Regulatory Responses To The Crisis
5.1 Capital
5.2 Liquidity Risk
5.3 Pre– and Post-Trade Reporting
5.4 Disclosure
5.5 Interconnectedness
5.6 Resolution
5.7 Risk Coverage

Chapter 6 – OTC Derivatives Central Clearing
6.1 OTC Derivatives Central Counterparties
6.2 Clearing and Clearing Houses
6.3 Organisational and Legal Issues
6.4 Client Clearing
6.5 Margin and Default Management
6.6 Segregation for Cleared OTC Portfolios

Chapter 7 – The Emerging OTC Market Infrastructure
by Bill Hodgson
7.1 The Current Bilateral OTC Environment
7.2 Trading In The Future Cleared OTC Environment
7.3 CCP Processes For Clearing Members
7.4 Clearing For Clients
7.5 Other Issues

Chapter 8 – Risks in OTC Derivatives Central Clearing
8.1 Risks To CCPs
8.2 CCP Risk I: Mitigation
8.3 CCP Risk II: Externalities
8.4 Risks from CCPs
8.5 Risks from Mandatory Clearing

Chapter 9 – Design Choices in Central Clearing and their Consequences
9.1 Financial resources
9.2 CCP Organisation
9.3 Clearing Mandates
9.4 Opposing paradigms
9.5 Deconstructing an OTC derivatives CCP

Chapter 10 – The Aftermath of Mandatory Central Clearing
10.1 Winner and Losers
10.2 The Future of OTC Derivatives Markets
10.3 The Impact of Mandatory Clearing on End Users
10.4 Post-crisis Ruling Making and its Consequences


So that was interesting April 13, 2012 at 8:56 am

The fourth and fifth Alphaville posts are here and here. Normal service will be resumed here next week, but meanwhile thanks to the Alphaville team for a fun week of guest blogging, and to Alphaville readers for their great comments.

The doom loop April 12, 2012 at 10:25 am

I cordially dislike that phrase, but a lot of people call it that so I got in line. Ah well, mildly histrionic terminology notwithstanding the third Alphaville post is up.

A tragedy in three acts on Alphaville April 11, 2012 at 11:20 am

The second in the series of FT alphaville posts on CVA is here.

CVA series April 10, 2012 at 11:59 am

All this week I am very pleased to announce that I will be a guest blogger at FT Alphaville, with a series of posts on CVA. The first one is here.

New paper on CCPs and counterparty credit risk March 12, 2012 at 2:09 pm

A new paper of mine, The possible impact of OTC derivatives central
clearing on counterparty credit risk
is available here. As usual, any comments would be much appreciated.

(Mildly) updated systemic risks of clearing paper – and pie January 7, 2012 at 7:00 am

Pie :-)

A slightly updated version of the Systemic Risks of OTC derivatives central clearing paper can be found here.

Any new comments would be much appreciated; they might even persuade me to share the pie…

The paper should print better than the prior version too, now that I have discovered how to save ISO 19005-1 compliant PDFs.

The confidence paper is up December 28, 2011 at 7:12 pm


The solvency/liquidity spiral was a major mode of large financial institution failure during the 2008 financial crisis. Many institutions began the crisis with significant funding liquidity risk. Initially unjustified investor doubts over an institution’s solvency caused a loss of confidence. This in turn caused the price and availability of funding to deteriorate, until in some cases this lead to failure. Thus a key factor in financial institution distress was loss of confidence caused by investor uncertainty over solvency.

As we show, the official accounts of the failures of Lehman Brothers and RBS provide substantial evidence for this failure mode. Our model has implications for confidence-enhancing regulatory and accounting policy, which we discuss. In particular, it suggests that minimum required capital is needed to keep investor confidence in a firm, and thus only capital above the minimum is available to absorb losses.

The full version is here.

Any comments would be much appreciated.

(Irritating geeky note: some folks have had some problems in the past with PDFs saved from Word 2010 not being readable on ipads. I think I have cured this problem here by saving an ISO 19005-1 compliant PDF, but please let me know if I haven’t.)

The systematic risks of OTC derivatives clearing October 20, 2011 at 10:18 am

An updated draft of my note can be found here. There are two health warnings: First, I had a hard 5,000 word limit, so it’s a little terse in places, especially if you aren’t sad enough to have spent time on OTC derivatives clearing in the past. And second, this is a draft, so I make no promises about what the final version will say… That said, any comments would be much appreciated.

The coming crisis in your Christmas reading December 10, 2009 at 6:22 am

Paul Kedrosky provides me with a good opportunity to do something my publisher has patently failed to do with any diligence – promote my book. He points out that:

There has been an explosion in books published about the ongoing financial crisis. From just two books published per month back in June of 2008 we have spiked all the way to 20 financial crisis books per month, even touching 26 books per month briefly.

But all of that is set to end. According to current publishing industry schedules, we will see a sharp increase in financial crisis books in December, but then declines through the first five months of 2010, taking as all the way down to only six books per month about the financial crisis. Six! Who can survive with only six?

And it gets worse. Unless something changes and a few more writers sign contracts … we could be under five financial crisis books a month by June of 2010. It is a horrifying thought.

So, ladies and gentlemen, hedge yourself. Buy a copy of mine: you can always read it backwards if you need something new. Meanwhile I shall contemplate rewriting it under the Macau constraint

The notable glibness with which the writer throws off chains of causation August 6, 2009 at 11:04 am

I have nothing to say, really, I just wanted to repeat a lovely phrase from the comments to the post before last.

Things here will be slow and less finance-oriented here for a little while for two reasons: firstly, I have been intending to move this blog away from blogger for some time, and I really want time to look into that. Secondly, the spectacle of the utter failure of reform is depressing me slightly, if not causing a Touretteish Torrent.

When a technology dies… July 19, 2009 at 3:42 pm

…you sometimes get a decent monument.

Here are the sound mirrors at Denge, Dungeness.

Sound Mirrors

Being bitchy June 10, 2009 at 6:29 am

Sometimes, when you have written about a topic, you pick up something someone else has written and are just blown away by the author’s understanding and insight. Let’s just say that this did not happen to me with Gillian Tett’s book on credit derivatives and the credit crunch.

The book is out June 9, 2009 at 11:15 am

Unravelling the Credit Crunch CoverMy book on the credit crunch is, according to my publisher at least, out today. link here, link here.

Update. In response to Phobos’ comment, please be assured that the book is intended for the general reader – there are no equations, and a background in mathematical finance is definitely not assumed.

Hiatus, leading to… March 19, 2009 at 5:58 pm

I am looking at hosting Deus Ex on my company website, and so posting will be light over the next little while as I investigate alternatives. Probably I’ll go for Word Press. Any comments from those with experience of such things would be very welcome.

Unravelling the Credit Crunch February 7, 2009 at 8:10 am

My new book on the Credit Crunch went off to my editor today. Here’s a contents list:

1 What Happened?
1.1 U.S. Residential Property: The Crunch Begins
1.2 Old and New Style Banking
1.3 What Happened in the Markets: The Second Stage
1.4 Après Lehman le Déluge: The Third Stage
2 Understanding the Slime
2.1 Mortgage Structures and Borrowers
2.2 How Mortgages Were Made
2.3 Mortgage Lending During the Greenspan Boom
2.4 A Story of the ODM: Countrywide Financial
3 Financial Assets and Their Prices
3.1 Securities
3.2 Markets and Prices
3.3 The Liquidity of Financial Assets
3.4 What’s In It For Me?
4 Liquidity and Central Banks
4.1 The Basis of Old-Style Banking
4.2 Liability Liquidity
4.3 Central Banks
4.4 Central Bank Policy in a Crunch
4.5 A Tale of Two Central Banks
4.6 A Twenty First Century Run: Northern Rock
5 The Crash of 1929 and its Legacy
5.1 The Crash of 1929 and the Great Depression
5.2 Political Reactions
5.3 The New Deal
5.4 The RFC and Other Rescuers
5.5 The Evolution of Freddie and Fannie
6 Securitisation and Tranching
6.1 Securitisation
6.2 The Securitisation of Subprime Mortgages
6.3 Models and Hedging
6.4 Model Risk
6.5 Where did it all go wrong?
6.6 The Write-downs
7 The Legacy Fails
7.1 The Growth, Distress, and Rescue of Fannie Mae and Freddie Mac
7.2 Financial Services Modernisation in the 1990s
7.3 The End of the Broker/Dealer
7.4 Lessons from the Failure of the Broker/dealer Model
7.5 Compensating Controls
8 Structured Finance
8.1 Credit Derivatives
8.2 ABS in Structured Finance
8.3 Structured Finance in the Boom Years
8.4 Insurance In Form And Name
8.5 The Rescue of AIG
8.6 Off Balance Sheet Funding
9 Municipal Finance and The Monolines
9.1 Municipal Finance
9.2 The Monolines Do Structured Finance
9.3 Insurers and Finance: A Toxic Mix?
9.4 Auction Rate Securities
10 The Rules of the Game
10.1 Accounting andWhy It Matters
10.2 Regulation and Regulatory Capital
10.3 The Consequences of Basel 2
10.4 Regulation away from Basel
10.5 Understanding Earnings
10.6 Japan’s Lost Decade
10.7 A Comparative Anatomy of Financial Crises
11 Changes and Consequences
11.1 Transmission
11.2 The Provision of Credit to the Broad Economy
11.3 What Worked and What Didn’t
11.4 Central Banks, Regulators and Accountants
11.5 Experimental Finance
11.6 The Financial System from 2009