Tracy Alloway

Derivatives of derivatives

April 1, 2014 Tracy Alloway Comments 0 Comment

While the outstanding amount of CDS has been shrinking, there is one pocket of the derivatives world that appears is growing pretty substantially – options on CDS indices. How much have these CDS index swaptions grown, you ask?

From a 2011 FT Alphaville post:

…. Citigroup revealed in “a brief CDX options primer” that the market for these financial instruments had surpassed an average $5bn in trading volume per week. And that’s just for options based on Markit’s CDX index — not even those on other credit indices …

Fast forward almost three years, and the latest estimate for weekly volume is, erm, somewhat higher.

… An average $60bn of CDS index options currently exchange hands per week … according to estimates from Citigroup based on data from the Depository Trust & Clearing Corporation (DTCC)….

CDS options market multiplies alongside questions (2011)
‘Swaptions’ trade leaps over regulatory hurdles (2014)

Hard-boiled conspiracy theories

March 26, 2014 Tracy Alloway Comments 0 Comment

Whenever I find myself dismissing a conspiracy theory out-of-hand, I try to remember that the President of the United States of America once tried to fight high domestic inflation by scaring the general public about the dangers of cholesterol in eggs.

From page 96 of Robert Samuelson’s The Great Inflation and its Aftermath:

Shoe prices went up, so [President Lyndon B Johnson] slapped export controls on hides to increase the supply of leather. Reports that color television sets would sell at high prices came across the wire. Johnson told me to ask RCA’s David Sarnoff [RCA was then a major TV manufacturer] to hold them down. Domestic lamb prices rose. LBJ directed [Defense Secretary Robert] McNamara to buy cheaper lamb from New Zealand for the troops in Vietnam. The President told CEA [Council of Economic Advisers] and me to move on household appliances, paper cartons, news print, men’s underwear, women’s hosiery, glass containers, cel- lulose, [and] air conditioners … When egg prices rose in the spring of 1966 and Agriculture Secretary Orville Freeman told him that not much could be done, Johnson had the Surgeon General issue alerts as to the hazards of cholesterol in eggs.

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Reading list – Where are the customers’ yachts?

March 25, 2014 Tracy Alloway Comments 0 Comment

In 1940, a former trader named Fred Schwed Jr sat down to write a book about Wall Street.

Mr Schwed had a front row seat for the crash of 1929, the unbridled Wall Street enthusiasm that preceded it, and the depression which followed. What he penned is a thoroughly enjoyable account of finance which continues to resonate, so much so that it was re-released during the bull market of the 1950s, again in 1996, and then again in 2006 – just before the crisis.

The whole thing is well worth a read, but as a fellow financial writer (of sorts) one passage struck me in particular.

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Millionaire in the machine

June 19, 2013 Tracy Alloway Comments 0 Comment

A non-finance related piece I wrote for Upgrade on one business tycoon’s quest for immortality through new technology.

Dmitry Itskov with Hiroshi Ishiguro at the Global Future 2045 International Congress

Dmitry Itskov dreams of immortality.

It’s a dream that the Russian multimillionaire is hoping to engineer into reality in a relatively short 32 years with his creation of the “2045 Initiative” – a project devoted to the kind of “life extension technologies” that currently populate science fiction.

Mr Itskov’s second attempt at promoting those technologies to a wider audience is the “Global Future 2045 International Congress,” held in New York over two days in June, and a follow-up to a similar gathering that took place in Moscow last year.

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