Headspace

The Maturity Structure of Corporate Risk Management.
The method of deriving the depth of firm hedging and the maturity of hedging for oil trading companies is intelligent and tricky and I love it! An oil company will buy some crude oil futures. Assuming no margins posted, there is no movements in the accounting books. (Simplistic idea because mark to market would occur monthly at least.) At time of book closing, when we have to put it in the balance sheet, we update the prices and include in our books the unrealised gains. Company buys crude at spot and this is registered as inventory. Any realised gain is realised to cash. Once the crude is refined, this is sold off and this is registered as Cost of Goods Sold as the amount of the hedge put in place (crude oil futures). The inventory is reduced. Profits is posted as well for the sale of goods. TADA!

Since the hedging can take place any time but since the futures contract is quarterly, the assumption is that hedging can take place 3/6/2/25 months. Alternatively, the hedging can take place at 3 month and rolled over every three months to reach the desired hedging maturity. Any the hedging activity will show up in the cost and sales using lagged futures prices and where do they show up? COGS. TADA!

So, the authors fix numerous stimulus equation to breaking down cost and revenue and the cost or profits relating to hedging using GMM. All the equations whizzed by with a series of question marks in my head. Then, they feed in accounting data and found that there is not a lot of hedging done by the corporations.

Institutional Investors, Credit Supply Uncertainty, and the Leverage of the Firm
The concept seemed interesting when I scanned the abstract and summary. It seems that the reason for not coming up with bonds is because of supply-side problems not just demand side problems. Then, I came home and lost interest in this paper. I like generalisations, I guess. Now the problem becomes, on one hand, on the other.

VIX Option Valuation
I came in when the presenter was showing strings and strings and strings of greek letters and furiously daydreamt about lunch. Does she really expect everyone to be able to follow all that in 20 minutes?

Predicting Credit Spreads
I think he was talking about credit spreads. Yeah. I was trying very hard to follow the talk - really, I did. I was listening and I could recognise the slope, curve and level of spreads in the equation. Then, he went on about riskless factor and somewhere in my mind, brakes were jammed and screeched and I was thinking "WHAT RISKLESS FACTOR?" and that went on until he began to showed some error graphs at the end of the models he made and said, I'm the king of the world. Not literally but the picture of the lion on the thank you slide said it.

Risk Assessment and Asset Allocation with Gross Exposure Constraints for Large portfolios
I wish I have a pet babelfish because in the middle of his talk he said something like "I will show you the money" and got the portfolio/investment managers incredibly excited. The article is not completed but he seem to have created a particular formula to allocate assets. The troublesome thing with allocation of assets is the with a constraint on the expected return and the ability to hold short positions and he said he has done it. The math looks impossibly brilliant, however. Yeah, it has a lot of greek letters.