Saturday, January 26, 2008

Rogue Trader at Societe Generale

Jerome Kerviel, the French trade from Societe Generale, is now on top of the rogue traders list. We see many other familiar faces on that list: Mr. Copper, The Orange County Treasurer and Mr Kerviel's predecessor, Nick Leeson.

Another interesting point is the potential "butterfly effect" of Jerome's action: The unwinding of his lossing trades became a major force behind the sharp market decline around the globe on Monday, which then pushed the Fed to cut rates by another 75bp and eventually led to one of the most volatile week in the history of wall street...

Thursday, January 24, 2008

Players in the back office of wall street

Some players I have learnt recently in the course of my work:

  • DTCC Deriv/SERV: Providing matching and settlement services for OTC derivatives, notably, credit default swaps. An interesting point is that DTCC provids the Master Confirmation Agreements on these CDS trades so that its participants can delivery trade confirmations in the "short form", and avoid signing bilateral confirmation agreements with each dealers.
  • CLS Bank: Performs settlement and netting for FX transations on a global basis, which greatly reduces counter party risks compare to the more traditional way of settling FX trades (i.e. settle each leg of the transation separately).
  • Prime Broker and Give-up Trades: When the client uses prime broker for certain FX trades, the executing broker must "give-up" trade details on these transactions to the prime broker for further process (settlement, legal confirmation, etc.)

Sunday, January 20, 2008

Model accuracy in different markets

Model accuracy in different markets from Paul's latest blog entry.

The dynamic relationship between just two equities can be beautifully complex, and certainly never to be captured by a single number, correlation.

There goes your reason why the CDO business is in deep trouble now...

Tuesday, January 15, 2008


It must be quite a long time since my last attempt to read some scrambled text. Yet here I am, trying to make sense of a SWIFT message, one of the standard wire formats for Wall Street's backoffices:

{1: F01BANKBEBB2222123456} {2: I100BANKDEFFXXXXU3003}...

Trust me, you don't want to read the official SWIFT Handbook unless you are having sleeping problems. Luckily, I have found a one-page introduction to SWIFT format in an odd place --- IBM WebSphere documentation.

Sunday, January 6, 2008

Bridge to Terabithia

Just close your eyes and keep your mind wide open.

                                ---- Leslie Burke, Bridge to Terabithia

Thanks to the very deceiving trailers, I thought Bridge to Terabithia was just another average fantasy movie at the time and skipped it. It couldn't have been further from the truth.

I was totally unprepared for the sad ending when I finally watched it yesterday. In every possible way, I liked Leslie and her mildly crazy personality (even for a fifth grader). And that's why the final tragedy was a bit shocking and, kind of depressing.

But then, I guess that's what a truly moving film should make people feel...