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  4. Feb. 2009

Capital Markets & IT -lakyara

Financial institutions are under constant pressure to reduce costs, improve operational efficiency, adapt to regulatory changes and grow their business. NRI believes that a combination financial knowledge and information technology are crucial to the industry’s growth and development. Through our lakyara reports, NRI identifies the various capital markets and IT issues impacting our clients and the future of their business.
*Organization names and job titles are current as of the publishing dates

Feb. 2009

Risk Management

Fair Valuation of Illiquid Financial Products and its Difficulties

Shungo Kai

It is important for financial institutions to reach an industry-wide consensus on methods for determining illiquid financial products’ fair value. Equally important is an understanding of mark-to-model valuation’s limitations.

Capital Markets

Ultra-Low-Interest-Rate Policy Leads to Dysfunctional Money Markets

Tetsuya Inoue

Japan’s experience with quantitative easing (“QE”) shows that an ultra-low-interest-rate policy leads to dysfunctional money markets. Specifically, it i) reduces transaction volume, ii) compresses credit and liquidity spreads, and iii) eliminates business opportunities. Moreover, Japan’s extended period of QE may have delayed the subsequent restoration of these functions. The optimal design of an “exit policy” therefore appears to remain an open question that should be answered based on lessons from the current crisis in the US and Europe.