nickles

12 ms·

91.
by nickles 7y ago
> To do this they just set the deposit rate under the "floor" to encourage banks to lend above that, but they didn't set a ceiling, assuming it would magically stay in target range? Yes. The Fed had hoped that IOER would s
92.
by nickles 7y ago
> Does this move mean that the fed is trying to keep its benchmark rate too low and absent market forces it would be much higher? Fed used to maintain a corridor system, in that they would intervene if effective fed funds went higher or
93.
by nickles 7y ago
> The Fed has been reducing the size of its balance sheet, letting the Treasuries and mortgage bonds it bought following the financial crisis roll off. In turn, that reduces the amount of cash reserves banks hold at the Fed. I'm som
94.
by nickles 7y ago
> You mean there has been so much cash around that nobody really needed to get cash via the fed funds market, for quite a while? Prior to IOER, banks needed to lend money on the fed funds market to earn interest on any excess reserves. D
95.
by nickles 7y ago
> That venture has some ROI. The temporarily higher repo rates have to be compared to that. That venture's costs are temporarily going from .002 percent to .02 percent of capital invested. Either way, a small portion. I don't s
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by nickles 7y ago
> The title says "overnight lend ing market" This article is about repurchase agreements (repos). They are a form of collateralized loan used in rates trading. If you need to borrow money for a short period, you can do so in
97.
by nickles 7y ago
> While dealing with assets in the billions Yes, those costs were computed on a book long 1 billion dollars of notional. There's a difference between notional and risk though. 1 billion dollars of 10y treasuries will be ~1mm dv01. B
98.
by nickles 7y ago
> So your business collapses when you have to temporarily pay $236 for something that normally costs $27? No, think of it as paying $236,000 for something that normally costs $27,000. You can think of this business as providing banking s
99.
by nickles 7y ago
> Discount rate is, by design, quite a bit higher than the fed funds rate, and is only tapped for credit in emergencies. That's right. Open market operations were traditionally used to target the fed funds rate. The discount window
100.
by nickles 7y ago
> Well, I guess it would be high on a typical loan. On an overnight loan, the difference between 9% APR and 1% APR is the difference between paying 0.0236% in interest for the loan and paying and 0.00273% As a rates trader, your position
101.
by nickles 7y ago
> I mean how else the current 2.00-2.25% rate is forced onto the financial system? Traditionally, Fed used open market operations to target the fed funds rate. This entailed either buying/selling treasuries or conducting repo operat
102.
by nickles 7y ago
> considerably less sensationalized To be clear, a GC repo at 7% to 9% is outrageously high. Lack of short term financing can have severe repercussions that ripple throughout the financial system.
103.
by nickles 7y ago
> When you send a letter it does not belong to the post office while in transit. You only have an expectation of privacy of the contents of the letter. You have no such expectation of anything on the envelope itself (e.g. sender/rec
104.
by nickles 7y ago
The constitution does not explicitly enumerate a right to privacy. Griswold v. Connecticut (1965) explicitly established the right to privacy. Justice Douglas’ opinion states that such a right exists within the “penumbras” and “emanations
105.
by nickles 7y ago
My understanding of your comments is influenced strongly by this statement: > Thus, any analysis that averages across market participants' P&L will conclude that futures trading is unprofitable[0], except for the market makers.
106.
by nickles 7y ago
> Isn't that example nearly zero-sum (ignoring the spread)? But ignoring the spread is incorrect, and nearly zero sum is not the same as zero-sum. The spread is the fee that market makers earn for a service they provide. You're
107.
by nickles 7y ago
Suppose a farmer wants to lock in the price of milk produced the farmer's dairy. The farmer wants to sell futures and sees a market of 18.30 / 18.50. These prices are probably being shown by a market maker. The farmer sells the fu
108.
by nickles 7y ago
> So for an outsider, I say it's pure speculation. And you assert this on what basis? There's enough that's been published to get some broad idea of what happens within the firm. > And I speculate that their outsized ga
109.
by nickles 7y ago
> Renaissance Technologies did not use algorithms to beat the market... This is false. RenTec generated outsized returns for a decade prior to entering into the derivatives with Barclays and DB beginning in 2000. > the bulk of their p
110.
by nickles 7y ago
This is a common misconception. Futures contracts are very often used for nonspeculative purposes (e.g. Starbucks locking in prices for buying milk or farmers locking in prices to sell wheat). This is a form of insurance. While the end user
111.
by nickles 7y ago
> An illiquid asset cannot be liquidated without slippage - that's why there's a liquidity premium. We agree here. > Those are the same thing. We disagree here. "In economics, a liquidity premium is the explanation for
112.
by nickles 7y ago
> As the manager of the ETF you could allow it to float freely in which case it could trade at a premium or discount to NAV. ETFs are securities that trade freely. They may be open ended or closed ended, but the price of both is determin
113.
by nickles 7y ago
> Any reasonably competent quant can calculate a liquidity premium and factor it into their ETF arbitrage strategy Liquidity premium isn't relevant here. The concept of the liquidity premium explains the differences in prices of oth
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by nickles 7y ago
> A second concern is the collateral effects of a bubble bursting: the inflated assets are tied into many other assets/instruments, and untangling the mess caused by a rapid bubble burst may cause a financial crisis. This is really
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by nickles 7y ago
> red light cameras however, they were shown to actually cause more accidents Adding to this, the issue was not directly with the cameras themselves but with the length of the yellow light. In order to increase revenue from traffic camer
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by nickles 7y ago
> As I have told my patients and medical students, a surgical infection is a life altering event. There is a good chance that you will never be the same after experiencing it. What is it that makes such an infection is so impactful? Is t
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by nickles 7y ago
> I just wonder where they get the cash in the meantime. >$1B/year burn rate They're raising up to $6B in a debt offering.
118.
by nickles 7y ago
> They "loaned" out $700B to a select few companies, many who were former employers of cabinet and treasury members. Only $4 out of $700 billion ended up going to help home owners directly, the other $696B went to Wall St This
119.
by nickles 7y ago
> Derivative contracts like perpetual futures are inherently better than old-school futures. Can you elaborate on this? Physically settled futures are important to producers and consumers of commodities. I can imagine that replacing thes
120.
by nickles 7y ago
> The first point violates your explicit 'ceteris paribus' assumption. Not necessarily. The decision of individuals to allocate in a particular manner can be thought of as a continuous function (IIRC this is called an indiffere

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