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Our experts frequently write blog posts about the findings of the research we are conducting.

Displaying 61-70 out of 78 results for "Volatility Products".

Déjà Vu: Non-Traded Business Development Companies

(Feb 2012)

Last week we posted an introduction to non-traded REITs that highlighted the many risks inherent to those investments. As it happens, another non-traded investment has been growing in popularity, but has an almost identical set of risk factors and has recently caught the attention of regulators: non-traded business development companies (BDCs).

The resemblance between non-traded REITs and non-traded BDCs is uncanny. Both are special business classes created by Congress in the mid 20th...

In the News: Structured CDs

(Feb 2012)

Bloomberg News reported this week that FINRA is investigating a relatively new type of product that ties the returns of certificates of deposit (CDs) to derivatives. These products are known generally as 'Structured CDs' (SCDs) but also go by 'Index-Linked CDs', 'Equity-Linked CDs' or 'Market-Linked CDs'. There have also been news stories concerning Market-Linked CDs issued by Wells-Fargo and Equity-Linked CDs issued by Goldman Sachs in recent years.

SCDs have existed since the late 1980s,...

Massachusetts Security Regulator Latest to Take Action on BoA CLOs

(Feb 2012)

The Wall Street Journal today reported that Massachusetts is investigating Bank of America for their role in the LCM VII and Bryn Mawr II CLOs. Secretary of the Commonwealth William Galvin is leading the investigation as to whether the two CLOs priced their underlying assets truthfully at the time of sales to investors. The subpoenas have also been picked up byBloomberg, Fox Business, and Reuters, amongst others.

SLCG initially reported the mispricing of these CLOs in a research paper earlier...

Reserve your Clever ETF Ticker Before it's Too Late

(Feb 2012)

The Wall Street Journal reported yesterday that descriptive and catchy tickers for Exchange Traded Funds (ETFs) are getting harder and harder to come by these days. From the article:

But finding a catchy symbol can be tough these days. Many have already been taken: 1,350 symbols are in use on the NYSE Arca alone, the biggest U.S. market for exchange-traded products. That's up 108% over the past five years, says Ms. Morrison. In addition, fund firms have reserved 2,446 symbols for future...

More CDO-related Mischief: Former Credit Suisse Trader Charged with Falsifying Trading Books

(Feb 2012)

Last Tuesday we pointed out how Banc of America transferred at least $35 million of previous losses to unsuspecting investors in two of its CDO offerings. This story was further exposed by the New York Times' reporter Gretchen Morgenson in her report on February 4, 2012 titled "A Wipeout That Didn't Have to Happen".

Also in last week, the ex-global head of Credit Suisse Group AG's CDO business, Kareem Serageldin, was charged in Federal Court by the Manhattan District Attorney for overstating...

A Wipeout That Didn't Have to Happen

(Feb 2012)

This weekend the New York Times' Gretchen Morgenson wrote an article about the recent FINRA award against Banc of America Securities for their LCM VII CLO. We have blogged about this case before, and have put together a research paper describing the underlying issue of warehousing assets in structured credit derivatives. We are very grateful to the New York Times and Gretchen Morgenson for giving this story the attention it deserves.

The fundamental problem with structured credit and many...

Schwab Sues FINRA RE: Class Action and Consolidated Claims

(Feb 2012)

There has been some buzz on the blogosphere concerning the ongoing dispute between Schwab and FINRA concerning the issue of class action waivers attached to securities products.

FINRA recently alleged that Charles Schwab & Co. violated FINRA rules by including class action waivers in their customer agreements. From their press release:

FINRA's complaint charges that in October 2011, Schwab amended its customer account agreement to include a provision requiring customers to waive their rights...

SLCG Research: Reverse Convertibles and Stochastic Volatility

(Feb 2012)

We've talked a lot about structured products -- and reverse convertibles in particular -- on this blog. In this blog post we discuss reverse convertibles in more detail and present some results found in a new research paper my colleagues and I have just completed.

Reverse convertible notes -- or simply "reverse convertibles" -- are structured products whose payoff at maturity is dependent upon the return of an underlying asset or security during the tenor of the note. If the underlying asset...

President and CIO of Direxion admits that leveraged ETFs are not appropriate for most investors

(Jan 2012)

Today Seeking Alpha posted an interview with Dan O'Neill, President and CIO of Direxion, one of the first and best known issuers of leveraged ETFs. Readers familiar with our work on leveraged ETFs know that we feel these products are almost always unsuitable for retail investors.

Surprisingly enough, Mr. O'Neill agrees completely:

The leveraged indexed ETFs are used by very tactical investors, and so there we have bull and bear funds. They have daily betas, which means that essentially...

Interest Rate Swaps

(Jan 2012)

In this blog post, we will discuss a particular kind of over-the-counter (OTC) derivative instrument called interest rate swaps. This post is meant as a broad stroke and an introduction to interest rate swaps. In the future, we plan to have additional posts about specialized interest rate swaps, case studies of particular interest rate swaps and on the pricing of interest rate swaps.

Interest rate swaps are customizable bilateral (involving two parties) agreements wherein one party exchanges...

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