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.
1. Which airport is this?
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:
- “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”
- “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).”
- “VaR models change almost every time we talk”
- “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”
- “A ‘hedge’ is not a self-evident feature of the world, but a contestable cultural category.”
- “We affirm that it is imperative to break the vicious circle between banks and sovereigns.”
- “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.”
- “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.”
- “The Federal Reserve should be abolished because it is immoral, unconstitutional, impractical, promotes bad economics, and undermines liberty.”
- “Credit rating agency Standard & Poor’s has upgraded itself to Triple-A Plus Super Fantastic”
- 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?
- Under the Basel III liquidity rules, what is the RSF for derivatives assets in the NSFR?
- Which asset class showed the largest reduction in capital requirements in the move from Basel I to Basel II?
- What is the margin period of risk for futures in the US? For swaps? Given this difference, what could possibly go wrong?
- 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.