RISK MANAGEMENT

Last week, after the French election, the VIX plummeted and started its journey into the low-volatility regime again. Consequently,  volatility selling strategy began gaining traction.  However, FT.com published a warning Jim Keohane, the chief executive of the Healthcare of Ontario Pension Plan, compares selling volatility to picking up dimes in front of a steamroller. “You…

Read More Why is Volatility so Low?

Last week, Bloomberg presented a fascinating story about Mexico’s secretive oil hedging program. We noted that while it was designed as a hedge,  the Mexican government has made money consistently with it. If anything, recent results have made the Mexican government look especially good. The country earned $6.4 billion in 2015 and $2.7 billion in…

Read More To Hedge or Not to Hedge

In a previous post we discussed how IFRS 9 will affect commodity firms through hedge accounting programs. Generally speaking, as pointed out by Thack Brown in this post, IFRS 9 will affect financial and non-financial corporates through: 1-New classification and measurement principles for financial assets, 2- New impairment models that will accelerate recognition of credit…

Read More How Will IFRS 9 Affect Financial Institutions?

A common belief among commodity producers, importers and exporters is that hedging should be based on analysts’ expectations.  Hence, they often attend meetings where they expect to hear forecasts from analysts and experts. For example, Ed White recently wrote Meeting halls at farm conferences are packed when the market analysis session is scheduled with farmers…

Read More Hedging Should be Based on Risks and Not on Forecasts

At the beginning of the year, as the markets reached new highs, investors became more complacent. Early this month, Rupert Hargreaves noted: Investors have plowed billions into stocks over the past few months while the generally positive sentiment within markets has helped pull central banks back into the shadows. Central bank decisions no longer have…

Read More Now Is The Time to Hedge, But The Cost of Insurance Can Be Expensive