Sovereign Derivatives is a technical guide for parsing the issues surrounding the sovereign debt market, using a global approach and a focus on real–life developments and practices. Extensive case studies on the most recent issues facing Europe and the global financial markets illustrate market–to–market issues, pre–hedges, big swap losses, debt manipulation through swaps, and more, giving you invaluable insight toward evaluating the dangers and opportunities of large sovereign derivative holdings. Both informative and normative, this book explores the sovereign CDS market, the Greek CDS saga, Libor manipulation, and the various ways in which sovereign derivatives are used and misused around the globe.
Europe′s growing debt woes have brought sovereign derivatives to the fore of the global finance discussion. This book is a central reference for understanding and working with these entities, giving you the tools and information you need to mitigate risk and build a better–informed derivatives strategy.
- Understand how Basel III impacts sovereign derivatives
- Learn what GDP derivatives are and how to price them
- Use derivatives as tools to promote development and manage public debt
- Consider the systemic risk in banks′ derivatives exposure to sovereign entities
The size of European banks′ derivatives exposure to sovereign entities is enormous, arriving from transactions with central and local governments. With Greece on the brink of debt, sovereign derivatives are poised to be the instrument behind systemic collapse the way MBS and CDS fueled the 2008 U.S. housing collapse. Savvy traders and risk managers need to stay ahead of the game, and Sovereign Derivatives provides a complete reference for handling these instruments with care.