Pablo Triana

A comprehensive guide to sovereign derivatives and their role in the global economy 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.

LECTURING BIRDS ON FLYING For the past few decades, the financial world has often displayed an unreasonable willingness to believe that "the model is right, the market is wrong," in spite of the fact that these theoretical machinations were largely responsible for the stock market crash of 1987, the LTCM crisis of 1998, the credit crisis of 2008, and many other blow-ups, large and small. Why have both financial insiders (traders, risk managers, executives) and outsiders (academics, journalists, regulators, the public) consistently demonstrated a willingness to treat quantifications as gospel? Nassim Taleb first addressed the conflicts between theoretical and real finance in his technical treatise on options, Dynamic Hedging. Now, in Lecturing Birds on Flying, Pablo Triana offers a powerful indictment on the trustworthiness of financial theory, explaining?in jargon-free plain English?how malfunctions in these quantitative machines have wreaked havoc in our real world. Triana first analyzes the fundamental question of whether financial markets can in principle really be solved mathematically. He shows that the markets indeed cannot be tamed with equations, presenting a long and powerful list of obstacles to prove his point: maverick unlawful human actions rule the markets, unexpected and unimaginable events shape the markets, and historical data is not necessarily a trustworthy guide to the future of the markets. The author then examines the sources of origin of many prevalent theories and mathematical dictums. He details how the field of financial economics evolved from a descriptive discipline to an abstract one dedicated to technically concocting professors' own versions of how such a world should work. He goes on to explain how Wall Street and other financial centers became eager employers of scientists, and how scientists became eager employees of financial firms. Triana concludes with an in-depth discussion of the most significant historical episodes of theory-caused real-life market malaise, with a strong emphasis on the current credit crisis. In the end, Lecturing Birds on Flying calls for the radical substitution of good old-fashioned common sense in place of mathematical decision-making and the restoration to financial power of those who are completely unchained to the iron ball of classroom-obtained qualifications.