Business and Economics > Investments: Derivatives

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Mr. Tobias Adrian
The evolution of risk management has resulted from the interplay of financial crises, risk management practices, and regulatory actions. In the 1970s, research lay the intellectual foundations for the risk management practices that were systematically implemented in the 1980s as bond trading revolutionized Wall Street. Quants developed dynamic hedging, Value-at-Risk, and credit risk models based on the insights of financial economics. In parallel, the Basel I framework created a level playing field among banks across countries. Following the 1987 stock market crash, the near failure of Salomon Brothers, and the failure of Drexel Burnham Lambert, in 1996 the Basel Committee on Banking Supervision published the Market Risk Amendment to the Basel I Capital Accord; the amendment went into effect in 1998. It led to a migration of bank risk management practices toward market risk regulations. The framework was further developed in the Basel II Accord, which, however, from the very beginning, was labeled as being procyclical due to the reliance of capital requirements on contemporaneous volatility estimates. Indeed, the failure to measure and manage risk adequately can be viewed as a key contributor to the 2008 global financial crisis. Subsequent innovations in risk management practices have been dominated by regulatory innovations, including capital and liquidity stress testing, macroprudential surcharges, resolution regimes, and countercyclical capital requirements.
International Monetary Fund. European Dept.
This 2018 Article IV Consultation highlights that the economy of Estonia is gathering steam after several years of subdued growth. Real GDP grew by 4.9 percent in 2017, more than double the rate achieved a year earlier. Growth remains broad-based, and supported by strong private and public investment—the latter partly reflecting increased absorption of European Union structural funds—and favorable external conditions. However, output runs above its sustainable level, and supply-side constraints are becoming more binding. The outlook is positive. Over the medium term, growth is set to remain at about 3.5 percent, supported by the continuing recovery of main trading partners, domestic investment, accommodative financial conditions, and continued strong market sentiment.
International Monetary Fund. Statistics Dept.
This Technical Assistance Report discusses the findings and recommendations made by the IMF mission about the compilation of Coordinated Direct Investment Survey and Coordinated Portfolio Investment Survey (CPIS) in El Salvador. The mission recommended the authorities to research the nature of the information available that may be useful for starting the CPIS. This entails discussions regarding the forms designed during the mission for requesting information from new sources. It was also recommended to continue efforts to improve the coverage of surveys applied to nonfinancial private sector enterprises, with emphasis on the largest enterprises that are still reluctant to respond to the balance-of-payments questionnaires.
International Monetary Fund. Statistics Dept.
This Technical Assistance Report discusses the findings and recommendations made by the IMF mission regarding the balance of payments, international investment position, and secondary income statistics in El Salvador. The mission reviewed progress made on the recommendations for the Coordinated Direct Investment Survey (CDIS). Although El Salvador is currently reporting data to the CDIS, there are some topics that need improvement, particularly the positions of the shareholders of the three most important financial groups and their subsidiaries to avoid duplicate entries. The mission agreed with the authorities regarding the monitoring of processing payment vouchers sent to the Central Reserve Bank of El Salvador by banks and other entities paying remittances for amounts exceeding the threshold of US$500 to complete the personal transfers’ estimates.
Andrés Fernández, Mr. Michael W Klein, Mr. Alessandro Rebucci, Mr. Martin Schindler, and Martin Uribe
This paper presents a new dataset of capital control restrictions on both inflows and outflows of 10 categories of assets for 100 countries over the period 1995 to 2013. Building on the data in Schindler (2009) and other datasets based on the analysis of the IMF’s Annual Report on Exchange Arrangements and Exchange Restrictions (AREAER), this dataset includes additional asset categories, more countries, and a longer time period. The paper discusses in detail the construction of the dataset and characterizes the data with respect to the prevalence and correlation of controls across asset categories and between controls on inflows and controls on outflows, the aggregation of the separate categories into broader indicators, and the comparison of this dataset with other indicators of capital controls.
International Monetary Fund

Abstract

La sixième édition du Manuel de la balance des paiements et de la position extérieure globale présente des normes révisées et mises à jour pour les concepts, définitions et classifications des statistiques des comptes internationaux. Ces normes sont utilisées à l'échelle mondiale pour établir des données complètes et comparables. La sixième édition est la dernière d'une série entamée par le FMI en 1948. Elle est le produit d'une vaste consultation et fournit des précisions demandées par les utilisateurs. Elle se penche aussi sur des sujets tels que la mondialisation, l'innovation financière et l'analyse bilantielle, qui suscite un intérêt croissant.

International Monetary Fund. European Dept.
Estonia has succeeded in reducing its macroeconomic imbalances and vulnerabilities, but faces the challenge of preserving its hard-earned fiscal and financial stability and enhancing long-term growth prospects. In this regard, adopting a fully fledged medium-term fiscal framework can help assess policy trade-offs and avoid procyclical policies. Financial sector stability can be safeguarded by strengthening macroprudential policies. Deeper Nordic-Baltic cross-border prudential arrangements and the EU banking union can enhance financial stability. Estonia needs to safeguard its external competitiveness, address skill mismatches, and accelerate human capital accumulation.
Ms. Sheri M. Markose
Financial network analysis is used to provide firm level bottom-up holistic visualizations of interconnections of financial obligations in global OTC derivatives markets. This helps to identify Systemically Important Financial Intermediaries (SIFIs), analyse the nature of contagion propagation, and also monitor and design ways of increasing robustness in the network. Based on 2009 FDIC and individually collected firm level data covering gross notional, gross positive (negative) fair value and the netted derivatives assets and liabilities for 202 financial firms which includes 20 SIFIs, the bilateral flows are empirically calibrated to reflect data-based constraints. This produces a tiered network with a distinct highly clustered central core of 12 SIFIs that account for 78 percent of all bilateral exposures and a large number of  financial intermediaries (FIs) on the periphery. The topology of the network results in the “Too- Interconnected-To-Fail” (TITF) phenomenon in that the failure of any member of the central tier will bring down other members with the contagion coming to an abrupt end when the ‘super-spreaders’ have demised. As these SIFIs account for the bulk of capital in the system, ipso facto no bank among the top tier can be allowed to fail, highlighting the untenable implicit socialized guarantees needed for these markets to operate at their current levels. Systemic risk costs of highly connected SIFIs nodes are not priced into their holding of capital or collateral. An eigenvector centrality based ‘super-spreader’ tax has been designed and tested for its capacity to reduce the potential socialized losses from failure of SIFIs.
International Monetary Fund

Abstract

The sixth edition of the Balance of Payments and International Investment Position Manual presents revised and updated standards for concepts, definitions, and classifications for international accounts statistics. These standards are used globally to compile comprehensive and comparable data. The sixth edition is the latest in a series that the IMF began in 1948. It is the result of widespread consultation and provides elaboration and clarification requested by users. In addition, it focuses on developments such as globalization, financial market innovation, and increasing interest in balance sheet analysis.

International Monetary Fund

Abstract

La sexta edición del Manual de Balanza de Pagos y Posición de Inversión Internacional presenta normas revisadas y actualizadas para los conceptos, las definiciones y las clasificaciones de las estadísticas de las cuentas internacionales. Estas normas se usan a escala mundial para compilar datos exhaustivos y comparables. Esta sexta edición es la más reciente de una serie que el FMI empezó en 1948. Es el resultado de un amplio proceso consultivo, que amplía y aclara la información relacionada con los pedidos de los usuarios. Además, se centra en cuestiones como la globalización, la innovación en el mercado financiero y el creciente interés el análisis del balance.