Derivatives users slow to learn crisis lessons

Most end-users of derivatives lack the ability to manage their risk properly, according to a recent survey by BNY Mellon. We talked to them about best practices.
Patrick Tadie, BNY Mellon
Patrick Tadie, BNY Mellon

If proof were needed that history is doomed to repeat itself, it came recently in the form of a study into how end-users manage the derivatives they buy. After the collapse of three of the market’s biggest counterparties Bear Stearns, Lehman Brothers and AIG most people might expect that the buy-side has wised up. Once bitten, twice shy, right

Wrong, apparently. When BNY Mellon asked a group of clients recently if they had the capability to price the over-the-counter derivatives contracts they had entered into, just 40% said yes. Without that ability, most have to rely on counterparties to value their collateral for them. “That’s a really bad thing to...

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