over the counter derivatives

Apr 15

Over the counter derivatives

The reason IQ Option reviews are so positive is that it is a legally licensed binary options brokerage company regulated by CySEC. Customer protection policies are enforced to prevent money crime and ensure each trader is identifiable.

U.S. and European derivative counterparties benefit from a variety of “safe harbors” if their counterparties enter into bankruptcy. They can offset winning against losing trades and if the amount is positive pay only a net amount. Normally the bankruptcy trustee can cherry pick by not performing on losing contracts and insisting on performance on winning ones (Pirrong, 2014). Amendments to the Bankrup


over the counter derivatives

IQ Option has a £10 deposit policy. It is important to note that this is not for use in the Free Binary Options Demo Account. This money credited to your live account once you are ready to begin actively working live. You can begin with this small amount as many novice traders do.  A demo account is probably the most important step in every new trader’s education. The honesty and sincerity of IQ Option is evident from their customer feedback. With this in mind customers feel extremely comfortable investing their funds with the company, knowing that they are providing the best system with free binary options training.



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Understanding the Derivatives Clearing Process - Loyola's Quinlan School of Business

อ่านเกี่ยวกับ over the counter derivatives

IQOption ReviewCompany Overview

Due to standing out in the financial world for years as a popular and customer-friendly binary options trading site, we took it upon ourselves to do a thorough, IQ Option review. The Russian-founded company is available in all countries but Sudan, Iran, U.S, Syria, Japan, Canada, and Israel.

Account Types & Opening

Creating an account is easy and fast. There is a form to fill after which one is required to verify their identity by providing personal information.

There are three types of accounts to chose from, depending on the deposits. Trading tools, signals, and indicators are available on all three platforms.

Demo account

Free Suitable for beginner traders who need practice.

Real money account

Minimum deposit is . Fast withdrawals in 3 business days Over 70 assets

VIP account

Minimum deposit of 98, Over 70 assets Fast withdrawals in 24 hours Advice and training from trading experts. Increased profitability

Promotions, Sign Up & bonuses

The IQ option custom made platform offers over seventy assets with some like the EUR/USD pair attracting a 91% profit. Turbo options can go minutes increments to 5 minutes while binary options can extend up to an hour and fifteen.

In addition to binary and turbo trading options, the brokerage site is soon launching The Classic Options where risks are limited to investment while profit remains unlimited

Fueling IQ Option's reputable reviews are the daily and weekly trading tournaments. All traders who join the contest get an equal amount of virtual funds. The winners share the pool of award funds.

It is exciting that IQ Option offers bonuses from 25% for every deposit made. There is also an option for rejecting by placing a code to block the extra funds.

For example; A trader deposits he/she will get .50 bonus. Let's say they increase their money to . To withdraw all funds including profits from the handout, a turnover is required. However, they can refuse to take the bonus and only withdraw profits from their investments.

Commissions and Fees

The IQ Option system does not charge commission on transactions. From signing up, trading, to withdrawing.

Trading Platform & Mobile Apps

Progress and innovation in the binary options trading industry have led to good IQ Option reviews. The technology and features of its trading platform make it easy for users to study the markets, thus correct signals.

Among its top tech advancements is the IQ Option mobile app. The app can be used either on the phone or laptop. Most traders favor the app to the trading website.

Deposit & Withdrawal Methods

The ease of fund deposits and withdrawal on IQ Option is great! Available options are: Visa and master card Skrill Web money Neteller Wire transfer

Regulatory & Safety

The reason IQ Option reviews are so positive is that it is a legally licensed binary options brokerage company regulated by CySEC. Customer protection policies are enforced to prevent money crime and ensure each trader is identifiable.

Source: http://www.theotcspace.com/content/over-counter-otc-derivative-primer-2-counterparty-risk


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Over the counter derivatives

Understanding the Derivatives Clearing Process - Loyola's Quinlan School of Business

วิดีโอ over the counter derivatives



The ease of fund deposits and withdrawal on IQ Option is great! Available options are: Visa and master card Skrill Web money Neteller Wire transfer

Annex: Derivatives in Bankruptcy

IQ Option is a professional brokerage company who understand the emotional stress that binary options, can and does place on novice and seasoned traders. They have made the free binary options demo available so that there is not added distress placed on the practice format by keeping the system close to the real thing, without having continued badgering phone calls from over-zealous, unscrupulous brokers.



Over-the-Counter (OTC) Derivative Primer: Counterparty RiskBy John Kiff

This post is the second in a series of over-the-counter (OTC) derivative primers. The first covered the product basics and this one will cover bilateral contract counterparty risk management. The next post will cover clearing and central counterparties (CCPs).

OTC derivatives expose counterparties to the default risk of others while those contracts have positive replacement values—the value or payment the nondefaulting party would receive if the contract were terminated early. The maximum loss from a defaulting counterparty is equal to the sum of the positive replacement values (“derivative receivables”). Plus, in the absence of legally enforceable offset rights (the contracts are not under a single master netting agreement) the performing counterparty would be on the hook to the non-performing counterparty for the sum of the negative replacement values (“derivatives payables”).

Valuations are generally derived from the value of arbitrage-free replicating portfolios of other financial instruments. Swaps are valued according to the market market prices of the implicit fixed and variable payment flows (e.g., LIBOR for most interest rate swaps). Options are valued on the market value of a dynamically hedged and funded portfolio of underlying assets. In the wake of the recent financial crisis, internal valuation models have become increasingly complex, factoring in counterparty risks, alternative discount rates and margin posting (see below).

However, most OTC derivatives are covered by bilateral master agreements that allow for close-out netting when one of the counterparties defaults. This is not the same as the payment netting that occurs throughout the life of a transaction in which all payment obligations in a single currency between counterparties are replaced with a single net amount on each payment date.

Close-out netting occurs at the end of a transaction when one party has defaulted. When default occurs, termination of the contract is typically triggered by the nondefaulting party, a single net amount due between the parties becomes payable, and the nondefaulting party is given access to its collateral if the defaulting party owes anything to the nondefaulting party. These permit the derivative payables to be used to offset derivative receivables within netting sets. (A netting set envelopes all trades with a given counterparty that can be legally netted together upon one of the counterparty’s default under the master agreement’s terms and conditions.)

Interestingly, the methodologies for calculating replacement values are typically not specified in master agreements. Instead counterparties use their own, often proprietary, valuation models so that valuation disputes are not uncommon. Murphy (2013) provides a worrisome example of the disputes between Goldman Sachs and the American Insurance Group (AIG) in 2007. (See the Goldman AIG Collateral Call Timeline on the Financial Crisis Inquiry Commission website.)

Counterparty risk can be further reduced by requiring collateral posting against outstanding exposures and residual risks. Residual risks include delays between when the new collateral requirements are calculated, called, and settled, the impact of minimum transfer amounts, and the potential for replacement value fluctuations from when default occurs and the contracts are closed out. In futures markets, the upfront amount is called “initial margin” and is viewed as a performance bond or guarantee that a counterparty will honor its contractual agreements.

Current exposures are covered by variation margin (VM) posting against day-to-day changes in net replacement costs. To cover potential future exposure, dealers usually require end users to post an “independent amount” or initial margin (IM). End-users include investment funds, hedge funds, and other nondealers. However, many sovereign and quasi-sovereign entities, and some corporate clients are often exempt from margin posting.

IM requirements for a portfolio of derivatives are typically calculated using a value-at-risk (VaR) based risk model (Murphy, 2014). Parameters are usually estimated with historical data over one- to five-year horizons, based on 99% confidence levels over 10-day liquidation periods. Add-on factors include collateral liquidity measures and stress test results. A typical stress test would be based on historical worst case moves over 10 business days (CGFS, 2010).

Margin is usually posted in the form of either cash or marketable government securities. Of the estimated trillion of collateral posted against bilateral OTC derivative transactions at end-2014, about 78% was cash and 18% government securities. About 75% of VM margin was posted as cash, versus about 60% for IM. For centrally cleared transactions nearly 100% of VM was posted as cash versus about 35% for IM (ISDA, 2015b).

As with the underlying exposures, collateral is usually revalued on a daily basis. However, “haircuts” are often applied so that collateral requirements reflect the potential for values to decline between the time when the counterparty defaults and when the collateral is liquidated. A haircut is a discount applied to the posted collateral’s market value to reflect its credit, liquidity, and market risk. For example, a 5% margin requirement, meaning that the collateral to be posted has to be 105% of the collateral’s market value, would be equivalent to a haircut of 4.75%.

Multi-Lateral Compression

Multilateral compression can be used to reduce counterparty risk by eliminating redundant contracts that result from multiple bilateral transactions. Redundant trades are a byproduct of the practice of entering into offsetting trades instead of terminating trades. For example, suppose “A” and “B” enter into a 10-year swap, but a year later “A” wants to close the position. If “A” and “B” cannot agree on termination terms, “A” might enter into an offsetting 9-year swap with “C”. As a result “A” now has two swap contracts and double the counterparty risk. Multilateral compression can knock out the contract between “A” and “B” so for example, if “A” owes “B” , and “B” owes “C” , then “B” can be eliminated and “A” will owe “C” the . From 2003 through to month-end March 2015 compression eliminated 8 trillion notional of interest rate derivatives (ISDA, 2015a).

This post just scratches the surface of this very deep and complex topic. For more detailed coverage see Jon Gregory’s Counterparty Credit Risk and Credit Value Adjustment, and the Counterparty Credit Risk, Collateral and Funding book by Damiano Brigo , Massimo Morini, and Andrea Pallavinci. See John Hull’s Options, Futures and Other Derivatives for a broad coverage of derivative valuation theory and practice. For a deep dive into interest rate derivative pricing see Howard Corb’s Interest Rate Swaps and Other Derivatives, Columbia Business School, and Sadr, Amir, 2009, Interest Rate Swaps and Their Derivatives: A Practitioner's Guide, and for credit derivatives see Dominic O’Kane’s Modelling Single-name and Multi-Name Credit Derivatives. Also some important legal points were glossed over in the discussion of close-out netting, some of which are covered in the annex below.

Annex: Derivatives in Bankruptcy

U.S. and European derivative counterparties benefit from a variety of “safe harbors” if their counterparties enter into bankruptcy. They can offset winning against losing trades and if the amount is positive pay only a net amount. Normally the bankruptcy trustee can cherry pick by not performing on losing contracts and insisting on performance on winning ones (Pirrong, 2014). Amendments to the Bankrup

Source: http://forextrading.company/broker/iqoption