logging in or signing up BICs Exchanges kongtcheu Download Post to : URL : Related Presentations : Share Add to Flag Embed Email Send to Blogs and Networks Add to Channel Uploaded from authorPOINTLite Insert YouTube videos in PowerPont slides with aS Desktop Copy embed code: (To copy code, click on the text box) Embed: URL: Thumbnail: WordPress Embed Customize Embed The presentation is successfully added In Your Favorites. Views: 1689 Category: Business & Fin.. License: All Rights Reserved Like it (0) Dislike it (0) Added: April 26, 2009 This Presentation is Public Favorites: 0 Presentation Description This presentation describes BICs, BICs exchanges, why they are needed and how they work. Comments Posting comment... Premium member Presentation Transcript BICs Exchanges : BICs Exchanges A Presentation On Derivatives Trading Architectures 4 A New & Better Financial Order Phil Kongtcheu What Are BICs ? : What Are BICs ? Simply stated, BICs are unit trading instruments into which one can statically break down any derivatives contract whose payout is a function of values that will become known in an upcoming timeline, without making any model assumptions You can learn more about BICs by reading the more expansive introduction @: http://tinyurl.com/cyxhpa & http://tinyurl.com/cfapm5 For more in-depth understanding, you can buy the book: Paperback edition: http://www.amazon.com/BICs-4-Derivatives-I-Theory/dp/0976425300 Kindle Edition: http://www.amazon.com/BICs-4-Derivatives-I-Theory/dp/B001IWOGZ4 A BICs Analogy? : A BICs Analogy? Every physical matter in the universe can be broken down into atoms For financial derivatives decomposition, BICs are the atoms On what type of underlyings can we setup BICs exchanges? : On what type of underlyings can we setup BICs exchanges? BICs exchanges can be setup on traded underlyings such as stocks, stock indexes, currencies, bonds, credit indices, commodities prices (oil, agricultural products,…) BICs exchanges can also be setup on non-traded underlyings such as temperature, credit, outcome of games, elections, etc. What is most important is that there is an agreed upon means of recording realized values of the underlying(s) on an agreed upon timeline Why do we need BICs in Risk Management? : Why do we need BICs in Risk Management? By enabling ultimate subdivisions and re-compositions, the BICs framework enables superior derivatives Risk Management The static replication framework of BICs helps reduce the costs of Derivatives hedging by eliminating or minimizing the need and cost of portfolio re-balancing at the core of dynamic hedging orthodoxy Why do we need BICs in Risk Management? : Why do we need BICs in Risk Management? The a priori static replication framework of BICs further helps effect more robust hedging strategies immune to model specification errors including regulatory and political interventions such as in times of crisis or market stress Why do we need BICs Exchanges ? : Why do we need BICs Exchanges ? BICs Exchanges are needed to fully realize the risk management benefits of a BICs framework BICs exchanges will further help enable more effective and realistic derivatives portfolio mark-to-market through a greater availability of benchmark instruments. The 2008 crisis and subsequent recession/depression underscore more acutely than ever the need for BICs How does a BICs exchange system work? : How does a BICs exchange system work? Briefly, the operations of a BICs exchange system can be described by breaking them into 4 steps: How does a BICs exchange system work? : How does a BICs exchange system work? Step 1: Request For Quote (RFQ) A user or price taker inputs the description of their derivatives contract to the system How does a BICs exchange system work? : How does a BICs exchange system work? Step 2: System Decomposition of Requested Quote Pay-Off Description into BICs Units a) The system breaks down the derivatives contract into BICs units according to the BICs backward iterative decomposition formula (See http://tinyurl.com/cyxhpa for more details) & b) Then requests Market Makers’ quotes on each feasible granular block of BICs units How does a BICs exchange system work? : How does a BICs exchange system work? Step 3: Selection of Best prices from Market Makers’ competitive quotes of BICs Units a) Market makers submit bid/ask quotes on replicating feasible granular BICs unit blocks possibly without even knowing what the original contract is & b) The system selects the most competitive quotes by market makers for each feasible granular BICs unit blocks among the competing market makers How does a BICs exchange system work? : How does a BICs exchange system work? Step 4: System Re-composition of Requested Quote Pay-Off prices from Market Makers’ competitive quotes of BICs Units a) The system uses the BICs backward iterative decomposition (See http://tinyurl.com/cyxhpa for more details) formula with the market makers’ most competitive prices to obtain a gross price & b) It then adds a service margin to return the price which is then quoted to the price taker BICs Exchange Architecture (also available at http://tinyurl.com/cyxhpa) : BICs Exchange Architecture (also available at http://tinyurl.com/cyxhpa) Where can one have a BICs exchange system ? : Where can one have a BICs exchange system ? A BICs system can be offered by a regular Derivatives Exchange A BICs system can also be offered by a trading institution as a service to Hedge Funds, High Network Sophisticated Investor or Corporate Clients A BICs system can be part of a new online venture spearheading a new and better financial order The BICs framework can enable a more robust derivatives pricing & risk management architecture And more... How credible is all this ? : How credible is all this ? This work has been reviewed in the most relevant manner by the World International Property Organization (WIPO) with the most favorable opinion issued. Demonstrative applications have been built World Intellectual Property Organization (WIPO) Third Party Review : World Intellectual Property Organization (WIPO) Third Party Review The International patent filing examination report on the inventive and patentable parts of BICs is publically available at: http://www.wipo.int/pctdb/en/wo.jsp?IA=US2003019179&wo=2003107137&DISPLAY=DOCS, A copy of most important section ( page 3 of the examination report) is on the next page Check also http://tinyurl.com/cfapm5 : Check also http://tinyurl.com/cfapm5 Slide 18: Thank You 4 Watching! Phil Kongtcheu a.k.a. Obi Wan Yoda Feel free to contact me via linkedIn (www.linkedin.com/kongtcheu) or my blog (kongtcheu.blogspot.com) You do not have the permission to view this presentation. In order to view it, please contact the author of the presentation.
BICs Exchanges kongtcheu Download Post to : URL : Related Presentations : Share Add to Flag Embed Email Send to Blogs and Networks Add to Channel Uploaded from authorPOINTLite Insert YouTube videos in PowerPont slides with aS Desktop Copy embed code: (To copy code, click on the text box) Embed: URL: Thumbnail: WordPress Embed Customize Embed The presentation is successfully added In Your Favorites. Views: 1689 Category: Business & Fin.. License: All Rights Reserved Like it (0) Dislike it (0) Added: April 26, 2009 This Presentation is Public Favorites: 0 Presentation Description This presentation describes BICs, BICs exchanges, why they are needed and how they work. Comments Posting comment... Premium member Presentation Transcript BICs Exchanges : BICs Exchanges A Presentation On Derivatives Trading Architectures 4 A New & Better Financial Order Phil Kongtcheu What Are BICs ? : What Are BICs ? Simply stated, BICs are unit trading instruments into which one can statically break down any derivatives contract whose payout is a function of values that will become known in an upcoming timeline, without making any model assumptions You can learn more about BICs by reading the more expansive introduction @: http://tinyurl.com/cyxhpa & http://tinyurl.com/cfapm5 For more in-depth understanding, you can buy the book: Paperback edition: http://www.amazon.com/BICs-4-Derivatives-I-Theory/dp/0976425300 Kindle Edition: http://www.amazon.com/BICs-4-Derivatives-I-Theory/dp/B001IWOGZ4 A BICs Analogy? : A BICs Analogy? Every physical matter in the universe can be broken down into atoms For financial derivatives decomposition, BICs are the atoms On what type of underlyings can we setup BICs exchanges? : On what type of underlyings can we setup BICs exchanges? BICs exchanges can be setup on traded underlyings such as stocks, stock indexes, currencies, bonds, credit indices, commodities prices (oil, agricultural products,…) BICs exchanges can also be setup on non-traded underlyings such as temperature, credit, outcome of games, elections, etc. What is most important is that there is an agreed upon means of recording realized values of the underlying(s) on an agreed upon timeline Why do we need BICs in Risk Management? : Why do we need BICs in Risk Management? By enabling ultimate subdivisions and re-compositions, the BICs framework enables superior derivatives Risk Management The static replication framework of BICs helps reduce the costs of Derivatives hedging by eliminating or minimizing the need and cost of portfolio re-balancing at the core of dynamic hedging orthodoxy Why do we need BICs in Risk Management? : Why do we need BICs in Risk Management? The a priori static replication framework of BICs further helps effect more robust hedging strategies immune to model specification errors including regulatory and political interventions such as in times of crisis or market stress Why do we need BICs Exchanges ? : Why do we need BICs Exchanges ? BICs Exchanges are needed to fully realize the risk management benefits of a BICs framework BICs exchanges will further help enable more effective and realistic derivatives portfolio mark-to-market through a greater availability of benchmark instruments. The 2008 crisis and subsequent recession/depression underscore more acutely than ever the need for BICs How does a BICs exchange system work? : How does a BICs exchange system work? Briefly, the operations of a BICs exchange system can be described by breaking them into 4 steps: How does a BICs exchange system work? : How does a BICs exchange system work? Step 1: Request For Quote (RFQ) A user or price taker inputs the description of their derivatives contract to the system How does a BICs exchange system work? : How does a BICs exchange system work? Step 2: System Decomposition of Requested Quote Pay-Off Description into BICs Units a) The system breaks down the derivatives contract into BICs units according to the BICs backward iterative decomposition formula (See http://tinyurl.com/cyxhpa for more details) & b) Then requests Market Makers’ quotes on each feasible granular block of BICs units How does a BICs exchange system work? : How does a BICs exchange system work? Step 3: Selection of Best prices from Market Makers’ competitive quotes of BICs Units a) Market makers submit bid/ask quotes on replicating feasible granular BICs unit blocks possibly without even knowing what the original contract is & b) The system selects the most competitive quotes by market makers for each feasible granular BICs unit blocks among the competing market makers How does a BICs exchange system work? : How does a BICs exchange system work? Step 4: System Re-composition of Requested Quote Pay-Off prices from Market Makers’ competitive quotes of BICs Units a) The system uses the BICs backward iterative decomposition (See http://tinyurl.com/cyxhpa for more details) formula with the market makers’ most competitive prices to obtain a gross price & b) It then adds a service margin to return the price which is then quoted to the price taker BICs Exchange Architecture (also available at http://tinyurl.com/cyxhpa) : BICs Exchange Architecture (also available at http://tinyurl.com/cyxhpa) Where can one have a BICs exchange system ? : Where can one have a BICs exchange system ? A BICs system can be offered by a regular Derivatives Exchange A BICs system can also be offered by a trading institution as a service to Hedge Funds, High Network Sophisticated Investor or Corporate Clients A BICs system can be part of a new online venture spearheading a new and better financial order The BICs framework can enable a more robust derivatives pricing & risk management architecture And more... How credible is all this ? : How credible is all this ? This work has been reviewed in the most relevant manner by the World International Property Organization (WIPO) with the most favorable opinion issued. Demonstrative applications have been built World Intellectual Property Organization (WIPO) Third Party Review : World Intellectual Property Organization (WIPO) Third Party Review The International patent filing examination report on the inventive and patentable parts of BICs is publically available at: http://www.wipo.int/pctdb/en/wo.jsp?IA=US2003019179&wo=2003107137&DISPLAY=DOCS, A copy of most important section ( page 3 of the examination report) is on the next page Check also http://tinyurl.com/cfapm5 : Check also http://tinyurl.com/cfapm5 Slide 18: Thank You 4 Watching! Phil Kongtcheu a.k.a. Obi Wan Yoda Feel free to contact me via linkedIn (www.linkedin.com/kongtcheu) or my blog (kongtcheu.blogspot.com)