Collateral and commodity market dynamics in the new normal
Collateral quality and depth are playing an increasingly important role in a market characterised by systemic risks and high correlations among asset classes, including commodities. That is a trend that should concern energy risk managers, argues Stephen Maloney
A broad range of asset classes saw price peaks from September 2007 to mid-2008, with crude oil among the last to unravel. Collateral demand rose over that period, taking down US investment bank Bear Stearns in March 2008, among others. The bankruptcy of Lehman Brothers on September 15 that year accelerated the collapse and marked a fundamental shift in financial markets.
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Markets are now in the ‘new normal’
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