From LIBOR to SOFR, the benchmark transition – Pt.4

Download as PDF SOFR On November 17, 2014, the Federal Reserve Bank established its own research group, the Alternative Reference Rates Committee, a commission composed by the major international banks, central counterparties and asset managers, with the support of the U.S. Department of Treasury,  the U.S. Commodity Futures Trading Commission (CFTC) and the Office of Financial Research (OFR). The group’s scopes were to identify a more resilient risk-free rate that would have substituted LIBOR in Read more…

From LIBOR to SOFR, the benchmark transition – Pt.3

Download as PDF ICE LIBOR Nowadays, LIBOR is administered by ICE Benchmark Administration, which publishes the rate for seven tenors (overnight, 1-week, 1-month, 2-month, 3-month, 6-month and 1-year) in five currencies (Euro, U.S. Dollar, British Pound Sterling, Swiss Franc and Japanese Yen). Currently, twenty panel banks submit their estimates between 11:05 and 11:40 am. Each bank has its submission methodology, but it has to be compliant with the guidelines provided by The Wheatley Review of Read more…

US Dollar Dominance and Its Future

Download as PDF Introduction The BIS triennial survey held every 3 years indicated most recently in 2019 that the USD was on 88% of all transaction. This makes it the world most used currency and the main reserve currency of centralbanks and transaction. However, another currency has recently made great gains in terms of adoption. The Chinese yuan. In this article we will investigate what defines a dominate world currency, the requirements to becoming one, Read more…

The Automotive Industry: A Contemporary, Broad Picture

Donwload as PDF Introduction Challenged by innovation technology, artificial intelligence, fierce competition, stricter emission regulatory frameworks and the effects of Covid-19, the automotive industry is currently going through tough yet prosperous times. As the analysis will highlight, major trends and challenges are not only endangering the system, but also stimulating innovation and further growth. The paragraphs that follow will walk the reader through the above-mentioned aspects of the industry under scrutiny, also addressing main M&A Read more…

An Estimation of the Risk Premium as Function of the VIX

Download as PDF Introduction The expected excess market return, or equity risk premium, is an unobservable element crucial in many financial applications ranging from corporate finance to asset pricing. Over the years, many researchers have studied the expected market return by tackling the estimation from different perspectives leading Welch, Goyal (2008) and Campbell, Thompson (2008) to re-examine the performance of such indicators from a common standpoint. In the academic literature, the traditional predictors of the Read more…

From LIBOR to SOFR, the benchmark transition – Pt.2

Download as PDF The First Reaction One of the first institutional proposals for a reform of LIBOR came from the Weathley Review of LIBOR. Commissioned in late June 2012 by the UK Chancellor of the Exchequer, it has been driven by Martin Weathley, former managing director of the Financial Services Authority (“FSA”) and former chief operating officer of Federal Conduct Authority (“FCA”). With a document called the “Initial Discussion Paper”, the Review asked market participants, Read more…

From LIBOR to SOFR, the benchmark transition – Pt.1

Download as PDF Introduction Since the 2008 Crisis, several events have undermined the global trust in the major financial benchmarks. Above all, the London Interbank Offered Rate (LIBOR) had its reputation impaired, and its role weakened. The spike in its value after the collapse and bail-out of leading banks posed doubts about its applicability in derivatives pricing. After, the manipulation scandal raised concerns about its reliability. Eventually, the lowering in the transaction volumes of its Read more…

Restructuring: Debtors in Distress

Download as PDF Introduction  Restructuring is the process of advising distressed companies (those in the midst of bankruptcy, or rapidly approaching it) in order to help them change their capital structure to get out of or avoid dissolution. This can be achieved by modifying their debt, operations or structure. Outcomes of this process range from distressed sales to refinancing scenarios, but this article will focus on bankruptcy procedures. Restructuring deals tend to differ from normal Read more…

If volatility be rough with you, be rough with volatility

Download as PDF The purpose of this special report is to introduce the emerging class of rough volatility models. Rough volatility is a relatively new concept originating from the empirical observation that log-volatility essentially behaves as a fractional Brownian motion at any reasonable timescale. While rough volatility is found to have increased accuracy and predictive power with respect to existing models, its modelling peculiarities make numerical implementations more computationally expensive, limiting its practicality. Recent developments, Read more…

Negative interest rate policy – friend or foe?

Download as PDF Introduction Interest rates have been persistently low across several advanced economies since the Global Financial Crisis. As short- and medium-term rates approached zero, central banks were compelled to turn to increasingly forceful measures in order to provide an adequate monetary stimulus. In 2012, the Danish National Bank was the first one to lower its key interest rate to the negative territory. In subsequent years, the ECB and the central banks of Sweden, Read more…

Market Recap 08/03/2020

Download as PDF US US market ended another wild trading week with a slight gain after last Friday substantive losses. S&P500 closed at 2,972.37, with a weekly gain of 0.61%. Dow-Jones Industrial Average Index (DJIA) was up 1.79% reaching 25,864.78. The demand for haven assets is rising and the bets are increasing for the Federal Reserve to cut interest rates again. US Federal Reserve has cut half a percentage point this week. The policy of Read more…

The Accuracy of Relative Valuation: Focus on the Banking Industry

Download as PDF Introduction Relative valuation is a widely spread approach among practitioners and is, broadly speaking, a double-check methodology, to back-test more sophisticated valuation techniques. Relative valuation relies on the main assumption that stock markets are on average efficient and fundamentals are correctly priced in. The aim of this article is to examine the effectiveness and the accuracy of relative valuation through an empirical analysis. The first paragraph highlights some of the main features Read more…

Moving Closer to the Masses : Morgan Stanley to Purchase E*Trade for $13bn in all-stock deal

Download as PDF Morgan Stanley [MS:NYSE] – Market Cap as of 06/3/2020: $64.116bn E*Trade [ETFC:NASDAQ] – Market Cap as of 06/3/2020 $9.33bn Introduction On Feb 20th 2020, Morgan Stanley announced it was looking to buy E*Trade in a $13bn deal, all stock deal—the largest acquisition by a U.S. bank since the 2008 financial crisis. The deal itself is a bet on smaller customers and Morgan Stanley’s impressive wealth management division, as it shifts even further Read more…

Deal Recap 8/03/2020

Download as PDF BSIC has brought you some of the most interesting deals over the last week, we hope you’ll enjoy! Elliot Management builds a 4% stake in Twitter Deal Value: $1bn | Deal Type: Shareholder Activism | Date: 01-Mar-2020 | Nationality: US | Sector: Technology Paul Singer has succeeded in building a stake in Twitter worth more than $1bn, obtaining a share of about 4% in the social media company. The intention is clear: Singer wants Jack Dorsey, founder and actual CEO, Read more…

Democratic Primaries: A markets perspective Part 2 – The Super Tuesday Follow-Up

Download as PDF Introduction Back in December we published an Article called “Democratic Primaries: A markets perspective” in which we provided an overview of the most significant Democratic candidates, namely Berny Sanders and Elizabeth Warren from a more liberal, left-wing side and Joe Biden and Michael Bloomberg from a more moderate centrist side, and their proposed legislations. We continued to form an opinion on how markets would react if said candidates would become the democratic Read more…