Friday, August 08, 2008

RBI report on interest rate futures

RBI has come out with a committee report. It fixes the ban on bank participation that snarled up interest rate futures trading all these years. For the rest, it's disappointing; years have been spent in writing something that a competent finance practitioner could have written (sans the mistakes) in an afternoon. Employees of the government are still doing product design, prescribing what hours trading should take place, tinkering with central planning about how participant of type X cannot engage in activity Y, etc. It is not imbued with the vision of the Bond-Currency-Derivatives Nexus. See the `Comment' by Susan Thomas towards the end of the report.

2 comments:

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  2. In my opinion, interest rates can be much better modelled as mean reverting than equities. And of course add it with the apparent transparency of the interest rate discovery to the entire process, I am glad that this is happening.

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