Category / Photography

The camera as pencil March 24, 2013 at 12:12 pm

Icy river

I pushed the scanner hard on this one; it worked out reasonably well though I think. The mist gives a nicely smudgy quality to it.

Bleak mid winter March 18, 2013 at 6:10 am

Icy river

This is definitely in Caspar David Friedrich territory.

Update. Talking of being out in the cold, the Cyprus depositor bail in is generating a lot of comment this morning. The general view seems to be that haircutting uninsured deposits, while painful, would be reasonable; but the current proposal to also haircut insured deposits is a bank run generator. I tend to agree, but it seems that the former was the IMF position, while the latter was chosen by the Cypriots themselves (HT Coppola Comment for the link). Even if that is true, it’s dreadful policy. As Tim Duy says, it is hard to see the assault on Cypriot depositors as anything but a step backwards for financial stability in Europe.

When will I see the sun again? March 9, 2013 at 3:51 pm

Icy river

Blue sky, blue water February 26, 2013 at 6:53 am

It was pretty cold though…

Icy river

Pastel snowscape February 17, 2013 at 6:00 am

I love the delicacy of these early morning colours*. Click for a bigger image.

Icy river

*I’m sure that there is a Pissarro with a similar gray/pink/orange winter colour palate, but the nearest I can find is the Road at Eragny. Any hints appreciated.

In honour of an angry fish February 9, 2013 at 9:15 am

I hope that none of you are too inconvenienced by Nemo. Here’s a rather chilly river, from a snow storm a little while ago. (Click for a higher res version.)

Icy river

Update. The award for ‘making the best of it’ after heavy snowfall goes to…

Snow fridge for beer

I’m not approving of that choice of beer, mind you.

Never shoot into the sun February 3, 2013 at 8:04 am

Like many rules, you can ignore this one sometimes.


Have a good weekend.

The coming of the light January 21, 2013 at 9:44 pm

A big project is about to emerge blinking into the light of day. I will have more for you good folks next week but meanwhile, here is the customary DEM space filler.

Coming of the Light

Happy New Year January 1, 2013 at 2:17 pm


May all your sunrises be good ones.

Our likely speed between now and the new year December 29, 2012 at 9:45 am

Zero mph

Bleak midwinter in the swaps market December 24, 2012 at 4:32 pm

Brrrr again

Bloomberg has a story on what it terms the looming swaps armageddon. I would not perhaps go that far, but the article is interesting.

I was spluttering at the first part of this sentence from Bloomberg about OTC derivatives clearing “This arrangement can withstand almost any shock, including defaults by four of the biggest lenders,” but the authors redeemed themselves with the kicker “according to the clearinghouses”. That’s pretty much like `Christmas is bah humbug stay home alone and eat pasta… according to turkeys.’

Craig Pirrong kicks in with a useful corrective in the next paragraph: “I just don’t think that realistically you can exclude the possibility that taxpayers could be at risk.” Indeed. Still, we can’t say that the supervisors have not been generous for Christmas. As Bloomberg points out, the Dodd-Frank rules could mean as much as $1 billion in new annual revenue for clearinghouses. This is of course the reason ICE can afford to buy NYSE Euronext: their stock price reflects the expectation of these future profits.

What we have really done with OTC clearing, it is increasingly clear, is to turn the low probability high severity event of a big OTC derivatives dealer failure into the perhaps lower probability probably higher severity event of CCP failure. This is exactly the wrong direction. Bloomberg quotes Blankfein on this: “We have to make sure that something that we do to reduce the risk in a once-in-a-20-year storm doesn’t increase the risk in a once-in-a-50-year storm.” Yes, we do: but we haven’t.

Meanwhile CCP resolution remains jejune and their disclosures are not sufficient to permit outsiders to assess their risk properly. “None of the major clearinghouses are providing sufficient detail on their default-management plans,” said Darrell Duffie, quoted in Bloomberg. “They don’t want to talk about that.” Meanwhile according to Bloomberg, “in non-public meetings this year at the New York Fed, Citigroup and JPMorgan pushed CME Group, Intercontinental and LCH to reveal more about their finances and risk-management policies, people with knowledge of the matter said.” There is a certainly going to be a lot to do on this in 2013. For the next few days, I am ignoring the advice of the Turkeys.

Happy Christmas to one and all December 21, 2012 at 9:13 pm

DEM will be back after the holidays. Meanwhile, best wishes for your holiday, wherever you are spending it.

Merry Christmas

It’s cold out… but the ice is lovely December 15, 2012 at 11:02 pm


I’m somewhere fairly chilly right now, but the morning sunlight glinting on the ice is beautiful, and there is plenty of good coffee back inside. Even DEM needs something with more warming power than a Macchiato on days like this. That is real snow falling in the picture, and accumulating on the ice floes…

Light posting – and a quiz to keep you (somewhat) amused December 6, 2012 at 6:16 am

I am trying to finish something, so things will be a little quiet here for a while. I’ll also be travelling, too, so let me leave you with sunrise over the Eastern seaboard* and a few other things besides. The DEM seasonal quiz consists of three rounds.

Picture round.

1. Which airport is this?

The sun rises in the East

(Hint: 071-00-23)

2. Name the banks**.


For extra credit, why is the price/book ratio of the middle one unusual, and what was the controversy concerning the scene depicted in the last picture?

3. Where is this?


For extra credit, what’s the connection with the recent conversion of Sandy Weill?

Quotation round. Identify the sources of the following quotes:

  1. “While there was broad consensus that re-hypothecation or re-use of initial margin should be
    prohibited in order to ensure that property would be readily available to derivative counterparties if the receiving firm failed, the US SEC has raised a question as to whether re-hypothecation or re-use of initial margin should be permissible”
  2. “History has shown that many systemic banking crises resulting in large commitments of public support have originated from excessive lending in real estate markets. This has often been coupled with funding mismatches and over-reliance on wholesale funding. The current levels of RWAs based on banks’ internal models and historical loss data tend to be quite low compared to the losses incurred in past real estate-driven crises. The EBA and the new single euro area supervisory authority should make sure that capital adequacy framework includes sufficient safeguards against substantial property market stress (e.g. via robust floors on the RWAs calculated by internal models).”
  3. “VaR models change almost every time we talk”
  4. “The loss of counterparties and increased haircut demands further exacerbated liquidity strains. In addition, throughout the week, securities that could no longer be funded through third-party repos market were left “in the box” at DTCC, BNYM and JPMC. The excess box collateral, as depicted on the Liquidity Dashboards, increased from $119 million on October 21 to $606 million on October 26. No funding in the market via repos or stock loans (as normally done) was available for these assets… At the same time, during the last weeks of October, the cash created within the repo matched book began to decline because counterparties demanded greater haircuts”
  5. “A ‘hedge’ is not a self-evident feature of the world, but a contestable cultural category.”
  6. “We affirm that it is imperative to break the vicious circle between banks and sovereigns.”
  7. “In particular, we must address, once and for all, the unfairness of a system that privatises gains and socialises losses. By restoring capitalism to the capitalists, discipline in the system will increase and, with time, systemic risks will be reduced. In addition, the knowledge that major firms in markets far away can fail, without meaningful consequences at home, will restore confidence in an open global system.”
  8. “We had some discussion about this issue, but there was no-one able to explain to me why there should be a totally different approach for FX markets in comparison to other markets. Of course I’ve learnt what the US did during the weekend – they will not include FX swaps in the Dodd-Frank regime. But that is the US approach. For the moment I don’t see any need to have another approach for FX at the European level.”
  9. “The Federal Reserve should be abolished because it is immoral, unconstitutional, impractical, promotes bad economics, and undermines liberty.”
  10. “Credit rating agency Standard & Poor’s has upgraded itself to Triple-A Plus Super Fantastic”

Regulation round.

  1. Under the Basel III capital rules, if I buy CDS to hedge my CVA from a counterparty with whom I have no collateral agreement, does the hedge attract CVA capital?
  2. Under the Basel III liquidity rules, what is the RSF for derivatives assets in the NSFR?
  3. Which asset class showed the largest reduction in capital requirements in the move from Basel I to Basel II?
  4. What is the margin period of risk for futures in the US? For swaps? Given this difference, what could possibly go wrong?
  5. What is the capital charge for AAA-rated non-granular senior ABS under Basel 2.5, assuming that the security is not a re-securitisation? Given that assets like that caused the biggest financial crisis in two generations, how do you feel about that?

Answers in the comments please. There may be a prize if (a) I can think of something suitable; and (b) the replies are impressive or amusing enough. Google if you want to, but it’s probably more fun to try guessing first.

* You are right, I didn’t say which country this airport is on the Eastern seaboard of. And was the American plane included to further confuse?

**Picture credit for the one on the right, Julia C Reinhart.

Classical orders revisited November 25, 2012 at 8:47 pm

Jonathan Meades has a hilarious review of the new Bomber Command Memorial at Hyde Park Corner in the LRB. His altogether apposite demolition of the building – in word if not deed – reminded me of how long it has been since we did classicism well, as here:

A classical stair

Benchmarking the snow November 17, 2012 at 8:35 pm

I can feel winter gathering, waiting for its moment to pounce. There will be snow before this is over – which has to be a good thing.

Benchmarking the snow

(Mind you, if this was your stadium, you might not feel so good about the snow. There are times when you really do have to go out and clear it, as these folks found out.)

Snow collapse

The second photo is from the Portland Press Herald; the first, like nearly all the others on this blog, is mine.

Gloucestershire sky November 8, 2012 at 9:55 am

This is from a few years ago – I can’t even remember how I did the manipulation (yes, Victoria, you should always use adjustment layers in Photoshop so that issue does not arise), but I came across it again this morning and liked it.

Gloucestershire Sky

By the way, there will be a couple of three star bores on the Severn (seen in the distance in the image) next week – your last chance to see this fascinating phenomenon before 2013. The chances of the river being purple are roughly as large as those of Jens Weidmann not being a danger to financial stability.

East London from the air (line) November 4, 2012 at 2:06 pm

Some friends visited yesterday and we tried the Emirates airline for the first time. Interesting views.

East London HDR

One interesting thing about suddenly having hundreds of thousands of tourists passing over them is that it has clearly made some businesses clean up their yards. Look how neat this is:

East London HDR

Memories of summer October 19, 2012 at 2:16 pm

Summer Trees

I may, if I have strength, get to Botched Derivatives Risk Taming Regulations tomorrow, but frankly I’d rather sit in the sun and let mosquitoes the size of small birds nibble me right now — sadly that is not an option…

The recent history of Jamie Dimon, by Matt Levine October 13, 2012 at 9:47 am

The more I read of Matt Levine, the more I like the guy’s style. Here’s a summary of Jamie Dimon’s recent career Levine penned yesterday:

  • Oversees huge opaque credit hedge position designed to optimize regulatory capital treatment.
  • Tweaks VaR model for that position to be all wrong, understating risk and thus probably overstating capital ratios.
  • Adjusts that position in dubious, risk-increasing ways, driven by capital treatment.
  • Loses a zillion dollars.
  • Trivializes that zillion-dollar loss.
  • Announces a material weakness in internal controls regarding, y’know, that.
  • Is all better.
  • Tweaks VaR model again to show less risk.
  • Gets on pugnacious earnings call in which he says he will ask regulators for additional stock buybacks in next year’s stress tests.
  • Brushes aside a question from a UBS analyst to the effect of “do you think your material weakness in internal controls will impact your ability to do buybacks?”
  • Says “our capital levels will be higher than you think because we will tweak our internal models to get them there.”

From which we conclude first that Levine is funny, smart, and not afraid to talk truth to Dimon; and second that the FED’s model approvals group is going to have a lot of fun with applications from JPM for model ‘enhancements’ in the next few quarters. It is good to have some light shone in that particular corner for once*.


*Yes, that was a really weak link for a picture that has nothing to do with the rest of the post. So sue me.