So SVB had a lot of bonds in the banking book and did not intent to sell them but due to rising interest rates accumulated huge unrealized losses which were not reflected in the PnL because of the principles of the banking book?
True. But SVB also had a liquidity problem which is the reason they sold a lot of bonds - those losses of course appear on the PnL. Which is why the bank is in big trouble.
Could sir explain the part between 03:55 and 04:20 ? Maybe my English lacks, i don't know. You said that " if i sell a bond after 2 months it will be relevant for me because i sell for lower price than i bought" But it's not relevant. Thanks in advance.
it is relevant solely because you're selling the bond cheaper than the price you bought them with. with his example maybe the figure is not that big (100 to 95, ~5% decrease) but in real life, companies hold millions worth of bonds so even the slightest movement matters when you're going to sell them. hope this helps!
I wish there would have been teachers like these in our colleges. Life would have been simpler and more enriching!
Amazing content ! Very clear and well structured.
Best teacher! thanks for making and sharing it.
lovely vid thank you
So SVB had a lot of bonds in the banking book and did not intent to sell them but due to rising interest rates accumulated huge unrealized losses which were not reflected in the PnL because of the principles of the banking book?
True. But SVB also had a liquidity problem which is the reason they sold a lot of bonds - those losses of course appear on the PnL. Which is why the bank is in big trouble.
It would be great if you could explain credit spread risk
I will put it on my list
Could sir explain the part between 03:55 and 04:20 ? Maybe my English lacks, i don't know. You said that " if i sell a bond after 2 months it will be relevant for me because i sell for lower price than i bought" But it's not relevant. Thanks in advance.
it is relevant solely because you're selling the bond cheaper than the price you bought them with. with his example maybe the figure is not that big (100 to 95, ~5% decrease) but in real life, companies hold millions worth of bonds so even the slightest movement matters when you're going to sell them. hope this helps!
@@transeuntestenebris Yes, thank you !
why is equity price not considered while commodity price is considered for pillar 1? both can have same volatility
I think, pillar 1 focuses on the main risk drivers for a banks portfolio - and the typical bank does not hold commodities in large quantities.