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30

(I worked there for 23 years.) Simon Johnson is correct. Citi (or its predecessors) was insolvent on those 3 occasions, and would have gone into liquidation without the bailouts by U.S. taxpayers.


18

Flow trading is in spirit very similar to market making - such firms make a profit by earning a spread. There are 3 common ways this is done. Suppose a client wants to buy 100k shares of XYZ, which is publicly quoted at 1M@10.01 bid, 1M@10.03 ask. For sake of simplification, assume sub-penny pricing is not accepted in the jurisdiction where XYZ is listed. ...


16

When someone deposits money at the bank, it immediately appears on the balance sheet as both, an Asset and a Liability: on the liability side, it will sit as something along the lines of "deposit owned to customers", and on the Asset side as "cash" (this is just regular "double entry accounting"). If the bank then lends part of ...


12

Fed funds futures settle into the average daily Fed Funds effective rates over the month. The December 2015 futures contract therefore covers the current Fed funds target rate (0-25bp) for 16 days, and then the new rate range (expected to be 25-50bp) for 15 days. To compute the exact probability of a rate hike involves some assumptions. For simplicity, let'...


9

This boils down to timeseries forecasting which is particularly challenging for financial data because finance exhibits all the things that makes forecasting hard: non stationary, low signal to noise, etc. In the case of forecasting deposits, I very much doubt that you will be able to get satisfactory results even if you do manage to figure out all the ...


9

This is an answer from European perspective. As @JanStuller has explained a retail cash deposit results in two balance sheet entries. In the simplest form: (Liability) Customer Demand Deposit, e.g. €100 (Asset) Central Bank Deposit, e.g. €100 Capital Requirements The asset can be transformed to other forms but according to Capital Requirements Regulation ...


6

Today (1 day after the fact) the following headline appeared in the Financial Times: "September Fed rate lift-off put in doubt, Fallout from China’s currency move turns market mood". If true, this would certainly explain why the USD declined (i.e. the interest rate rise that everyone expected has been postponed). However, in my experience it is very hard to ...


6

First point to consider : some banks are by nature "positive" in their account to the central banks , for instance classical saving banks tend to get more deposit than loans; conversely others are more engage in loans activity (investments banks..) and are by "nature" borrowers on Interbank markets. Secondly (the point you underestimate), mandatory ...


6

Delta one trading desks provide synthetic exposure to their clients. OK, so what does that mean? Delta One desks give their clients exposure to a product (stock index, ETF, or even a single stock) without the client actually buying the underlying product. For example, a customer can take their money and buy the stocks in the SP500 index. Or, they can ...


5

(1) Often there is some collateral behind the loan (a building, etc.) which with enough effort and time can be sold to recover at least SOME of the value of the loan. However this is not necessarily what the bank is good at or wants to do. Their business is to lend money, not make real estate deals or dispose of dubious merchandise. (2) A smart buyer will ...


5

Simply put, Russian banks (and other institutions) had local assets and hard-currency liabilities. Local assets lost value not only because they were denominated in a currency that unexpectedly depreciated by a lot, but also the equities market crashed, and a lot of the corporate debt defaulted following the government default (local-currency debt). Hard-...


5

Afaik and as Jan Stuller already mentioned, banks have to meet requirements to the Leverage Ratio, which gets mandatory with CRR II in 2021. For simplicity, most banks will have to meet a minimum of 3%. Important note: riskweights do not play a role here. That's why the leverage ratio is decreasing when customers put their money to the banks, leading to ...


4

U.S. Government DID save American International Group (AIG) from bankruptcy, since it was considered too big to fail, actually: a lot of financial institutions were insured by AIG. This Investopedia page is a nice summary on the topic about AIG's bailout. Here (Investopedia again) about Lehman Brothers, that became really too much leveraged and exposed to ...


4

You might want to check what FDIC has. They have a lot of quarterly data for bank balance sheets. Unfortunately, I don't think they have data for all US banks, only the ones they insure.


4

Sort of. (But I don't really like the way you put it). The purpose of capital adequacy regulations is to protect the depositors (and senior creditors). The capital is a kind of "cushion" that protects the creditors if assets go bad. The purpose of provision regulation is to make sure that the capital figures are accurate: as soon as losses are predicted ...


4

The U.K. Government is not in the business of owning banks. The investment was never supposed to make money - it was to rescue RBS during the financial crisis.


4

Responding to the first question and building on Dimitri's comments, it is probably worth your while to do some due-diligence on the some of the standard issues that come up in Financial ML and see to what extent they apply to your problem: Interpretability: How will you interpret the results of your Deep Learning model and share them with users/decision ...


4

Your “Credit Risk” variable sounds like it should be more accurately described as “Credit Spread”, which proxies the risk of loans. As credit spreads increase, the risk of the loans a finance company’s portfolio increases. Since finance company portfolios are becoming more risky, investors require higher compensation for that risk, which lowers the price. So ...


3

This is a annuity calculation. Present Value of Annuity $= \text{Payment} \cdot \frac{1-(1+r)^{-n}}{r}$ Therefore: Payment = Present Value of Annuity $\cdot \frac{r}{1-(1+r)^{-n}}$ Present Value of Annuity $= \$\,104,107.4099\,;\,\,\, r = 0.33\,\%;\,\,\, n = 480$ Monthly Payment $ = \$\, 432.5186$


3

Well, I do not think there is a large difference: Given you deposit money at a Bank the value of this deposit changes according to $$\frac{dB_t}{B_t} = r dt$$ which simply means there is no uncertainty with respect to this evolution (instead of incorporating a risky component $dW_t$. If you really want to interpret the risk-less asset as a bond you are ...


3

Here is another Credit Default Swap database which is rather extensive, daily spreads of roughly 700 entities starting in 2006.


3

You should consider the stages of the default process instead of a binary "default", where there are various points the borrower is able to cure the loan. In a traditional credit model, the general process is to predict the state of the loan and then predict transitions between stages over the life of the loan. This is done by simulating macro variables (...


3

I am afraid there is no short answer to that question. However there is some literature you can check. In this paper the author gives an overview over different methods and lists a lot of references. One approach is to decompose the volume timeseriies of your checking accounts into two parts: One volatile part: this is money which customers use to cover ...


3

You can look at the contents of the CFA institute : https://blogs.cfainstitute.org/insideinvesting/2013/01/23/how-much-does-apple-make-a-dupont-analysis/ . As there are more and more candidates and CFA charteholders, we could say that their views are becoming or are already the mainstream views. I would add that accounting and corporate finance is not a "...


3

Another problem is the bank's GSIB score. There are about 10 components that go into the GSIB score calculation, but one of them is (bank equity)/(balance sheet). Having a poor GSIB score means the bank will have to a surcharge assessment on it's balances. So in other words, if a bank just takes in more deposits - and does nothing with them - the leverage ...


3

Apologies if this answer is a bit off the beaten track. The reason capital requirements are imposed on deposits is historical. In the United States they were introduced by Alexander Hamilton (1755-1804) who was knowledgeable about British banking practices. In the 18th century people understood that banking can be dangerous. The failure of Law's Bank in ...


2

The bank in china has to have an account at an intermediary bank, and order a transfer from that account to the account of the US bank. Therefore the chinese bank needs to have the dollars.


2

High level Flow of funds comparative analysis for the U.S., Japan, and Euro Area by the bank of Japan. Country level report from the ECB. It is an 800+ page report so the link may take time to load (alternatively go to ECB data warehouse/reports/Euro Area accounts). Canadian financial flow accounts data.


2

Regarding how the rating agencies gave AAA ratings to CDOs and the like that clearly did not deserve those ratings - straightforward answer. The SEC licences all the ratings agencies as "nationally recognized statistical rating organizations" (NRSRO). It is blindingly obvious that the SEC was not actually overseeing the rating organizations that it was ...


2

The Fed (under the Yellen regime) has always stated that any adjustments to the Federal Funds rate are "data dependent." These data points (CPI inflation, inflation expectations, non-farm payrolls, GDP, et cetera) are only available on a monthly or quarterly basis, (depending on the print) which would cause them to have to make an uninformed decision if the ...


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