Thursday, May 17, 2012

Social network vs critics

The Guardian: reports on a Harvard business school study that compares Amazon book reviews to critics and finds that evaluation is similar, though the reviews are swift to find new authors.

 "Amazon reviewers were more likely to give a favourable review to a debut author, which the Harvard academics said suggested that "one drawback of expert reviews is that they may be slower to learn about new and unknown books".
Professional critics were more positive about prizewinning authors, and "more favourable to authors who have garnered other attention in the press (as measured by number of media mentions outside of the review)"."

'via Blog this'

Tuesday, May 08, 2012

Collateral and rating

A good overview of the effect of rating downgrade and increased risk aversion on the profitability of investment banks and, inevitably, the liquidity of financial markets.
M Stanley reassesses downgrade impact - "The additional collateral needed could reduce Morgan Stanley’s fixed income derivatives revenues by almost a third, analysts at AllianceBernstein estimated in a recent note. In addition to having to stump up extra collateral to its trading partners, Morgan Stanley could also face a higher cost of funding, the analysts said."
This also gives some indication of the importance of the economies of scale in investment banking.

Monday, May 07, 2012

International holding of bonds and capital

International holding of government bonds.

Bank adequacy: weight and see - "But what would be the effect of removing the zero weighting on banks’ domestic sovereign debt holdings? In its latest stability report, the IMF takes a stab at estimating the “correct” risk weightings to use, via default rates embedded in sovereign credit default swap spreads. Doing this lowers the average capital adequacy ratios across banks in emerging countries by 2-3 percentage points – no small sum. Ratios for European banks fall by less, between 0.5-2 percentage points. The reduction for US lenders is smaller still. Even so, more capital would be needed."

'via Blog this'

Thursday, May 03, 2012

Funds move directly into loan market

If funds cannot If funds cannot get access to loans via structured products, can they go into the market themselves by making loans?  M&G are in £266m property financing deal -  
"It is the second time this week a UK insurer has provided debt finance for a property deal, with Legal & General issuing its maiden property loan on Tuesday.
The relationship between the two sectors is deepening rapidly as insurers snap up opportunities created by the shortage of bank lending."

'via Blog this'