Global ETF News Older than One Year
Flaws with Black Scholes Model (BSM) & Exotic Greeks-new paper
June 18, 2013--ABSTRACT
In 1973, Fisher Black, Myron Scholes and separately Robert Merton derived the Black-Scholes-Merton (BSM) model, which was rewarded the Nobel Prize in 1997.
Despite its limitations, the model has survived until today as the dominant pricing model for standard and exotic European style options.
The model owes its success to its simplicity, high intuition and versatility. In 1997, the importance of their model was recognized worldwide when Myron Scholes and Robert Merton received the Nobel Prize for Economics. Unfortunately, Fisher Black died in 1995, or he would have also received the award [Hull, 2000]. The Black-Scholes model displayed the importance that mathematics plays in the field of finance. It also led to the growth and success of the new field of mathematical finance or financial engineering.
view the research paper-Flaws with Black Scholes Model (BSM) & Exotic Greeks
Source: thomsettoptions.com
Mirae-Can EM's Rate Cuts Help to Revive Economy?
Some countries cut rates in response to weakening growth.
June 18, 2013--China
Economy continued to show weak signals
Weak economic data seemed to lower the market's expectations on growth with economists revising down on this year's growth forecasts.
With the preliminary May HSBC Markit manufacturing PMI dropping below the 50-neutral level for the first time in six months, it showed recent economic activities continued to remain on the soft side. Retail sales also slowed to 11.8% year-over-year in April. Meanwhile, inflation growth fell to 2.1% YoY in May from 2.4% in April. Meanwhile, The State Council met to discuss plans for economic reform in 2013 on May 6. In addition to confirming its plan to eliminate or decentralize items requiring government approval, the State Council also announced its intention to implement reforms in nine key areas.
India
Interest rate cuts to be a floor to GDP growth.
Though declining inflation and subdued commodity prices led to strong performance of the India market through the first half of May, the strong US dollar and higher Indian trade deficit for April resulted in rupee depreciation, causing the market to lose momentum.
The Reserve Bank of India further reduced the repo rate by 25 basis points to 7.25%, bringing cumu¬lative rate cuts in the current cycle to 125 basis points. This is a response to the drop in the Wholesale Price Index in April.
Asean
Good economic signals for the Philippines.
In Malaysia, first-quarter GDP growth fell to 4.1% year-over-year, from 6.5% in the fourth quarter, on the back of slowing exports. That said, domestic investment demand remains high now that the elec¬tion overhang has been removed. The ruling coalition Barisan Nasional retained control, winning 60% of parliamentary seats.
First-quarter GDP growth in Thailand came in at 5.3% year-over-year, trailing the consensus forecast of 6%, as both private and govern¬ment consumption softened significantly from a high base.
Brazil
Weak currency and poor growth weigh on markets.
The Latin American region underperformed in May on the back of widespread currency weakness and disappointing GDP growth in Mexico and Colombia, in addition to Brazil. However, unlike Brazil, the central banks of Mexico and Colombia lowered interest rates in recent months in response to weakening growth.
Weak output data and earnings momentum con¬tinue to weigh on the Brazilian market. First-quarter GDP growth came at 1.9% year-over-year, much lower than the expected level. Slowing household and government consumption, along with weak exports, negatively impacted the demand side. Inflation remains at the top of the target band, increasing 6.5% year-over-year in May. In light of inflationary pressure, the central bank again raised interest rates by 50 basis points to 8%.
EMEA
Turkey and Poland cut rates to record low.
As weakening macro¬economic indicators, falling oil prices, and weak commodity prices weighed on the market, Russia underperformed the other emerging markets as well as developed markets in May.
Elsewhere in Eastern Europe, though the Turkish market continued to climb for much of the month, it fell significantly as anti-government protests escalated toward the end of the month. Meanwhile, in Poland, lower-than-expected output data and concerns that the US Federal Reserve will begin unwinding quantitative easing, has caused the Polish zloty to fall significantly against major currencies.
Source: Mirae Asset
J.P. Morgan Introduces Enhanced Collateral Management Services
Collateral CentralSM to Provide Complete Collateral Portfolio Management for Buy-and Sell-side Clients Across Custody, Clearing and Counterparty Relationships
June 17, 2013--J.P. Morgan today introduced significant enhancements to its industry-leading collateral management business to help clients navigate new industry regulations.
Core to these enhancements is Collateral CentralSM, a dynamic, real time service that provides clients with advanced asset tracking, margin management, proprietary optimization algorithms and analytics to support collateral activities across a wide range of derivatives, securities and cash transactions in real time. The roll out of these capabilities allows the management of collateral to move from an operational consideration to the front line of trading and portfolio management decision making.
Source: JP Morgan
BlackRock Investment Institute-Setting New Standards-The Liquidity Challenge II May 2013 paper
June 17, 2013--Setting New Standards
A bull market can disguise many sins. Take the corporate bond market. On the
surface, everything appears hunky dory. Issuance is at record levels, investors are desperate for yield in the zero-rate world and price performance has been great.
Things look shakier up close. It is not easy to buy and sell bonds in secondary markets. Liquidity is patchy, and many bonds have turned into museum pieces: nice to look at, but tough to take home. This is likely a structural shift.
view the Setting New Standards-The Liquidity Challenge II May 2013 paper
Source: BlackRock Investment Institute
BlackRock Weighs Merits of Standardized Corporate Bond Issues
June 17, 2013-- BlackRock Inc. (BLK) is proposing a solution to low trading volumes in many corporate bonds: having borrowers issue more-uniform deals.
Standardization in the $5.5 trillion U.S. investment-grade corporate bond market "looks unavoidable in the long run," the asset manager said in a paper released Monday by the BlackRock Investment Institute.
Source: Euro Investor
EU Said to Raise No Objections to ICE Takeover of NYSE Euronext
June 17, 2013--European antitrust regulators have lodged no objections to IntercontinentalExchange (ICE) Inc.'s takeover of NYSE Euronext (NYX) as a decision on the transaction approaches, according to a person with direct knowledge of the matter.
While formal approval of the deal, which would give ICE control of NYSE’s Liffe derivatives exchange in London, hasn’t been issued, antitrust officials have communicated no opposition to the companies, according to a person, who asked not to be identified because the review is private. A decision from the European Commission is expected by June 24, the person said. Shareholders of both companies approved the transaction, which values NYSE at $10.2 billion, on June 3.
Source: Bloomberg
EPFR Global News Release-Bond Funds break own outflow record
June 17, 2013--Going into mid-June EPFR Global-tracked Bond Funds set a new outflow record for the second week running as fears that US monetary policy will tighten in the second half of the year prompted more investors to head for the exits.
Overall, they pulled $14.45 billion out of Bond Funds and another $8.5 billion out of Equity Funds during the week ending June 12 as interest rates for 30-year US mortgages climbed to a 14 month high and key equities indexes continued to slide.
Visit www.epfr.com for more info
Source: EPFR
ETF Securities-Precious Metals Weekly: Platinum and Palladium Supply Risks Rise as Eskom Power Shortfalls add to Labour Concerns
June 17, 2013--Precious metals prices declined across the board last week, as expectations of reduced Fed stimulus gathered pace.
While consensus appears to expect the Fed to reduce its bond buying program as early as September, this week’s Fed meeting has the potential to shake this faith as rising bond yields and subdued inflation give the Fed scope to follow the IMF’s advice to maintain the program until growth has a firmer footing. With futures positioning in gold and silver highly negative, any gold or silver price positive news has the potential to drive a strong short-covering rally. It may be too early for such news to sustainability improve the fundamental outlook for these metals, but it is something investors’ should monitor. In the meantime, power problems at South Africa’s power provider, Eskom, and labour issues at the mines will likely continue to exert downward pressure on new supplies of platinum and palladium and upward pressure on their prices.
Source: ETF Securities
Market Vectors' Fran Rodilosso on the Recent Volatility in Emerging Market Debt
June 14, 2013--Though emerging markets sovereign hard and local currency debt have been among the most volatile fixed income asset classes for the past several weeks, the longer term trend of portfolio allocations to emerging market debt asset classes is a major theme that will continue for the next several years, according to Fran Rodilosso, Fixed Income Portfolio Manager at Market Vectors ETFs.
"U.S. interest rate volatility was the spark that eventually led to a broader sell-off in fixed income markets globally. Higher interest rates and signs of growth in the U.S. have also fueled a move sharply higher in the U.S. dollar versus virtually every major emerging market currency, save the Chinese Yuan," said Rodilosso. "No doubt some of the fundamental developments in Brazil, Turkey and South Africa have compounded negative currency and fixed income moves in those countries."
Source: Daily Finance
Passives becoming active choice for many
June 14, 2013--
Growing awareness of the impact of charges on long-term returns for investors means that low-cost index trackers and exchange traded funds (ETFs) are playing an increasingly important role in portfolios run by wealth managers.
“There is no question that wealth managers are increasingly looking at ETFs and passive funds to keep costs down as they move to fee-based models,” says Neil Jamieson, head of UK & Ireland, ETF Securities.
Source: FT.com
