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IMF Working paper-Operative Principles of Islamic Derivatives - Towards a Coherent Theory
March 1, 2012--Summary: Derivatives are few and far between in countries where the compatibility of financial transactions with Islamic law requires the development of shari'ah-compliant structures.
Islamic finance is governed by the shari’ah, which bans speculation and gambling, and stipulates that income must be derived as profits from the shared generation of goods and services between counterparties rather than interest or a guaranteed return. The paper explains the fundamental legal principles underpinning Islamic finance with a view towards developing a cohesive theory of derivatives subject to shari’ahprinciples. After critically reviewing accepted contracts and the scholastic debate surrounding existing financial innovation in this area, the paper offers an axiomatic perspective on a principle-based permissibility of derivatives under Islamic law.
view the IMF Working paper-Operative Principles of Islamic Derivatives - Towards a Coherent Theory
iShares introduces interactive tool to simplify investor ETP due diligence
March 1, 2012--iShares, the Exchange Traded Funds (ETF) platform of BlackRock, Inc. (NYSE: BLK), today announced the introduction of a new user-friendly European Due Diligence tool: Know Your ETP. The tool enables professional investors to obtain the key information they need to know about any European Exchange Traded Product (ETP).
“Know Your ETP” is an interactive questionnaire which enables investors to obtain detailed and precise information about a product, regardless of its provider. It is designed to simplify the due diligence process investors currently follow by providing a robust and standardised framework that allows for easy comparison of different products. The “Know Your ETP” tool comprises a four-step process:
1.Investors fill in the name of the fund they wish to analyse
IOSCO consults on oil price reporting agency oversight
MArch 1, 2012--The Technical Committee of the International Organization of Securities Commissions (IOSCO) has published a consultation report, Functioning and Oversight of Oil Price Reporting Agencies, which examines the role played by Oil Price Reporting Agencies (PRAs) in the functioning of oil markets, their methods of operation and governance and potential options for future oversight.
The Consultation Report is aimed at informing IOSCO’s response to the G20 Leaders’ request in November 2011 that “IOSCO, in collaboration with the IEF, the IEA and OPEC, [to] prepare recommendations to improve their functioning and oversight to our Finance Ministers by mid-2012.”
The report builds on the joint report on Oil Reporting Agencies jointly produced by IOSCO, IEA, IEF and OPEC (IOs Report) which was submitted to G20 in advance of the Cannes summit.
view Functioning and Oversight of Oil Price Reporting Agencies
China reduced U.S. Treasury holdings last year
March 1, 2012--China, the largest foreign holder of U.S. government debt, reduced its holdings of federal securities last year, according to revised data released Wednesday by the Treasury Department.
China’s holdings fell to $1.15 trillion at the end of last year from $1.16 trillion at the end of 2010. It reached a high of $1.31 trillion in July.
The drop suggests China could be diversifying its stock of $3.2 trillion in foreign reserves compiled through years of trade surpluses.
"Rare Earth Element ETF Could Make Investing In Rare Earths Lucrative" The Absolute Wealth Newsletter Published Today
To provide information on rare earth metals, the Absolute Wealth newsletter published "Rare Earth Element ETF Could Make Investing In Rare Earths Lucrative" today.
February 29, 2012-To provide rare earth mineral information, the Absolute Wealth newsletter published the "Rare Earth Element ETF Could Make Investing In Rare Earths Lucrative" article today.
The Absolute Wealth newsletter reveals, that investors have been taking a second look at rare earth element ETF for investing in rare earths. The Absolute Wealth newsletter reports that the top 3 rare earth metals currently are Cerium, Neodymium, and Gadolinium.
Cerium is actually the 25th most abundant element in the Earth’s crust, the newsletter explains, having 68 parts per million. The Absolute Wealth newsletter says that it is roughly as abundant as copper and could feasibly find itself traded individually on global commodity exchanges if adequate supply lines were secured. Commercial applications of cerium are numerous, which the Absolute Wealth newsletter says include catalysts, additives to fuel to reduce emissions and to glass and enamels to change their color.
Deutsche Bank Chooses Guggenheim for Asset Management Talks
February 29, 2012--Deutsche Bank AG said it is holding exclusive talks to sell its asset-management divisions to the U.S. money manager Guggenheim Partners LLC.
The sale negotiations apply to the four businesses that the Frankfurt-based bank put under review, including DWS mutual funds in the Americas, the advisory units for institutional investors and insurance firms, and its RREEF real-estate and infrastructure division, the firm said in a Business Wire statement today.
Price Formation on the CDS Market: Lessons of the Sovereign Debt Crisis (2010-)
February 29, 2012--ABSTRACT
Further to recent trends in CDS prices and sovereign bond yields, this memo looks into the subject of price
formation on CDS markets, notably on sovereign issuers. Interviews were conducted on this subject with
operators on these markets.
Operators agreed that for Germany and the United States, recent CDS market trends have had no impact on
the financing costs of these States. This matches the findings of academic research which has not yet
established a causal link between the CDS prices and bond yields of the best-rated sovereign issuers. The
sovereign CDS market is still lacking in depth compared with bond markets, arbitrage possibilities are costly
and risky and the operators are not necessarily the same on the two markets. The analyses that have been
conducted, especially over the recent period, confirm that neither the CDS nor the bond market can be
shown to lead the other. They also show that as long as spread levels remain low, correlations between
CDS market and bond market are weak: as long as default risks seem to be contained, bonds play their role
as a refuge. However, when sovereign risk rises sharply and spreads reach a certain level, bonds lose their
refuge function and a correlation appears. France would seem to have been in such a situation since
autumn 2011.
IOSCO Makes Recommendations On OTC Derivative Mandatory Clearing
February 29, 2012--The Technical Committee of the International Organization of Securities Commissions has published a Final Report on Requirements for Mandatory Clearing, which outlines recommendations that authorities should follow in establishing a mandatory clearing regime for standardised OTC derivatives in support of the G20's Leaders Commitments to improve transparency, mitigate systemic risk and protect against market abuse in these markets.
The Report has been prepared by the IOSCO Task Force on OTC Derivatives Regulation in order to provide guidance consistent with the Financial Stability Board’s (FSB) Recommendation 12 in its report on Implementing OTC derivatives Market Reforms. This report asked IOSCO to coordinate the application of central clearing requirements on a product and participant level, and any exemptions from them, as a means of minimizing the potential for regulatory arbitrage.
The Report outlines recommendations that authorities should follow in establishing a mandatory clearing regime within their jurisdiction. These are in relation to:
Determination of whether a mandatory clearing obligation should apply to a product or set of products; Consideration of potential exemptions to the mandatory clearing obligation; Establishment of appropriate communication among authorities and with the public; Consideration of relevant cross-border issues in the application of a mandatory clearing obligation; and Monitoring and reviewing the overall process and application of the mandatory clearing obligation.
view Requirements for Mandatory Clearing report
DTCC Promotes Market Transparency With New CDS Tables
February 29, 2012--DTCC's Across the Pond information series, which provides regular updates on the latest financial reform developments in the U.S. and Europe, has expanded its content to include publication of weekly tables listing credit default swaps (CDS) contracts on the top 15 sovereign and corporate reference entities and top 15 percentage movers.
The addition of the CDS tables in Across the Pond builds on DTCC’s ongoing efforts to promote greater transparency in over-the-counter (OTC) derivatives markets.
Excerpted from public data in DTCC’s Trade Information Warehouse (TIW), the tables are based on net notional values and provide a high-level overview of CDS exposure. The tables are a reliable resource for global market participants, regulators, government officials and journalists who track movements in the OTC derivatives markets.
IMF working paper-Systemic Real and Financial Risks: Measurement, Forecasting, and Stress Testing
February 28, 2012--Summary: This paper formulates a novel modeling framework that delivers: (a) forecasts of indicators of systemic real risk and systemic financial risk based on density forecasts of indicators of real activity and financial health; (b) stress-tests as measures of the dynamics of responses of systemic risk indicators to structural shocks identified by standard macroeconomic and banking theory.
Using a large number of quarterly time series of the G-7 economies in 1980Q1-2010Q2, we show that the model exhibits significant out-of sample forecasting power for tail real and financial risk realizations, and that stress testing provides useful early warnings on the build-up of real and financial vulnerabilities.