83,357
edits
Credit value adjustment: Difference between revisions
Jump to navigation
Jump to search
no edit summary
Amwelladmin (talk | contribs) No edit summary |
Amwelladmin (talk | contribs) No edit summary Tags: Mobile edit Mobile web edit |
||
| Line 10: | Line 10: | ||
There is a neat logic to this — if I consider [[out-of-the-money]] exposures to be my term [[indebtedness]], then if my prospects have worsened, I would be able to buy this [[indebtedness]] back at less than its face value for exactly the same reason, so why shouldn’t I mark my liability down in the same way? | There is a neat logic to this — if I consider [[out-of-the-money]] exposures to be my term [[indebtedness]], then if my prospects have worsened, I would be able to buy this [[indebtedness]] back at less than its face value for exactly the same reason, so why shouldn’t I mark my liability down in the same way? | ||
So the [[investment bank]]s did, and in size. They called these “[[debt value adjustment]]s”, and while it was a thing, it didn’t fare so well and these days there aren’t as many Investopedia articles about it. But, around 2011, it was the talk of the smoky salons where [[Credit derivative|credit]] traders would gather to complain to each other about the prevailing squeeze on their own credit. Strangely, as this alleviated, they grew less enthusiastic about having to pay to hedge away the cost of their own improving fortunes with [[credit derivatives]] as, oddly it began to seem a bit silly. | So the [[investment bank]]s did, and in size. Let the [[low quality earnings]] klaxons blare. They called these “[[debt value adjustment]]s”, and while it was a thing, it didn’t fare so well and these days there aren’t as many Investopedia articles about it. But, around 2011, it was the talk of the smoky salons where [[Credit derivative|credit]] traders would gather to complain to each other about the prevailing squeeze on their own credit. Strangely, as this alleviated, they grew less enthusiastic about having to pay to hedge away the cost of their own improving fortunes with [[credit derivatives]] as, oddly it began to seem a bit silly. | ||
So you would not be alone if you felt something tugging at the strings of your bullshit apron: if this ''seems'' a bit [[snake oil]]-y, that’s because it ''is''. | So you would not be alone if you felt something tugging at the strings of your bullshit apron: if this ''seems'' a bit [[snake oil]]-y, that’s because it ''is''. | ||
| Line 27: | Line 27: | ||
{{sa}} | {{sa}} | ||
[[Low quality earnings]] | |||
*[https://ftalphaville.ft.com/2011/10/13/701766/how-one-banks-default-is-the-same-banks-gain/ Lisa Pollack of FT Alphaville in typically sparkling form] | *[https://ftalphaville.ft.com/2011/10/13/701766/how-one-banks-default-is-the-same-banks-gain/ Lisa Pollack of FT Alphaville in typically sparkling form] | ||