This summary is based on research conducted between February and March 2021 with 20 banks looking at current trends and priorities for Prime Brokers in the Margin, Collateral and Data areas.
Offering valuable insight into the priorities and challenges facing prime brokers, broker dealers and clearers, this report is a summary of the discussion during the Margin, Collateral and Data Round Table, sponsored by Imagine Software on Thursday 25th March 2021.
If a firm does not have all of its positions modeled on the same risk platform, it cannot know its total risk. But strong tools and practices can help sell-side and buy-side firms alike to avoid creating dangerous conditions.
In times of stress in the markets, not only does volatility increase for individual assets, cross-asset correlations can increase dramatically as well. This results in a “double whammy” for a typical portfolio because the portfolio’s volatility increases due to both effects.
Most market observers agree that the many uncertainties swirling around the US Presidential election are likely to generate volatility in the US equity market that could last well beyond November 3rd.
It was a historic moment to be remembered when crude oil plunged into negative price territory on Monday 20th April 2020. Imagine’s Data, Technical, Development and Professional Services teams stood ready to assist users in ensuring they continued to correctly calculate risk metrics across commodity trading books. While negative prices are not a new thing in financial markets, it was the first time for crude oil to exhibit such behaviour. Standard pricing models (Black Scholes) for commodity future options are not designed to handle negative underlying prices. As such, Imagine applied an ‘early roll’ of the front month contract of May crude to the June expiry as the negative settle price was confirmed.
The health and safety of our communities including our employees, clients and partners are of critical importance to us. Imagine Software has taken proactive steps to protect employees during the outbreak. It is the goal of Imagine Software during any such time period to strive to operate effectively, ensure that all essential services are continuously provided and that employees are safe within the workplace.
As China confronts numerous internal and external challenges from slowing economic growth, disruption in Hong Kong and a volatile trade conflict with the United States, it may be prudent to assess and understand the risk a hard landing for the Chinese economy may pose to your portfolio.