1. For internal use only
Deutsche Bank
Corporate & Investment Bank
CROSS-CURRENCY ASSET SWAP OPPORTUNITIES FOR
ASIA
28th May 2014
Siddhant Goenka
Macro-structuring Desk
IIM Ahmedabad
Project Guides
Adithya MR
Himanshu Saran
Ria Ghosh
Smita Sahai
An internship on
2. How creative leaders think
Creative Problem Solving
AGENDA
Presented By: Pooja , Ishwar, Vipul 1
3. For internal use only
07/01/2011 – v35.0
2
INTRODUCTION
Macro-Structuring Desk: Cross-Currency Asset Swap Opportunities for Asia
Introduction Existing models
Leader Creative
thought
Processes Examples
Experimental
Findings
Conclusion
• How do leaders shape the production of new ideas?
• Implicit assumption: Leader is not part of the creative process
• Leader – A supporting player? (Existing models)
Objectives
• Examining the role leaders play in creative problem solving efforts by
a group
• Developing a model describing the nature of the creative thought
required by leaders in the context of follower’s creative ideas
4. Overview Prologue XCCY Asset Swap Project Solutions Ancillary Introduction Existing models Tasks Learnings & Scope
For internal use only
07/01/2011 – v35.0
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EXISTING MODELS
Leader Creative
thought
Processes Examples
Experimental
Findings
Conclusion
• Virtually all theories of creative thought assume that domain relevant
expertise or technical skill is essential for the generation of viable new
ideas (Ericsson & Charness, 1994; Finke, Ward, & Smith, 1992;
Weisburg, 1999)
• Studies of creativity emphasize not only expertise, but also the
cognitive processes (problem finding, conceptual combination, and
idea generation) (Baer, 2003; Mumford, Mobley,
• Uhlman, Reiter-Palmon, & Doares, 1991; Ward, Smith, & Finke,
1999).
• Specifically, most models of creative thought assume that idea
evaluation follows idea generation (e.g., Isaksen & Parnes, 1985;
Mumford et al., 1991; Simonton, 1999)
5. Overview Prologue XCCY Asset Swap Project Solutions Ancillary Introduction Existing models Tasks Learnings & Scope
For internal use only
07/01/2011 – v35.0
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Leader Creative
thought
Processes Examples
Experimental
Findings
Conclusion
LEADER’S CREATIVE THOUGHT
6. Overview Prologue XCCY Asset Swap Project Solutions Ancillary Introduction Existing models Tasks Learnings & Scope
For internal use only
07/01/2011 – v35.0
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Leader Creative
thought
Processes Examples
Experimental
Findings
Conclusion
LEADER’S CREATIVE THOUGHT: PROCESSES
• Evaluation involves forecasting or projecting the outcomes of idea
implementation within the setting at hand (Merrifield, Guilford,
Christensen, & Frick, 1962)
• Forecasted outcomes are then used to appraise the idea with respect
to a set of a priori standards held to apply in the setting under
consideration.
• One form of knowledge likely to influence the standards applied in
evaluation of new ideas is the mission being pursued by the leader.
• In contrast to vision, referring to an evaluative image of the future,
mission refers to the production and technological objectives of the
enterprise
• Mission, of course, is not the only form of knowledge likely to
influence the conceptual combination and evaluative processes that
provide the basis for leaders’ creative thought. Leaders also apply
their own expertise.
7. Overview Prologue XCCY Asset Swap Project Solutions Ancillary Introduction Existing models Tasks Learnings & Scope
For internal use only
07/01/2011 – v35.0
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Leader Creative
thought
Processes Examples
Experimental
Findings
Conclusion
LEADER’S CREATIVE THOUGHT: PROCESSES
• Conceptual combination, or combination and reorganization, is
commonly held to be the key process by which people rearrange or
reshape existing knowledge to construct the new cognitive structures
that provide a basis for idea generation
• In conceptual combination, expertise is held to be principle based,
allowing new combinations to be formed through analogical feature
search and mapping (Baughman & Mumford, 1995; Dunbar, 1995)
• Among leaders, however, principle-based knowledge appears less
important to idea generation than case-based knowledge.
• Case-based knowledge structures are used by people to represent
incidents of prior performance and are less abstract than principle-based
structures including information about actions, procedures,
goals, and restrictions
8. Overview Prologue XCCY Asset Swap Project Solutions Ancillary Introduction Existing models Tasks Learnings & Scope
For internal use only
07/01/2011 – v35.0
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Leader Creative
thought
Processes Examples
Experimental
Findings
Conclusion
LEADER’S CREATIVE THOUGHT: PROCESSES
• Case-based knowledge structures are used by people to represent
incidents of prior performance and are less abstract than principle-based
structures including information about actions, procedures,
goals, and restrictions
• Leaders’ use of experiential cases is advantageous for two reasons.
It allows prior practical experience in the system at hand to be
incorporated into leaders’ conceptual combination and idea
evaluation activities.
It does not require the construction and integration of abstract
principles, case-based knowledge is less difficult to work with in
conceptual combination, thereby permitting leaders to engage in
more rapid appraisal and idea generation
9. Introduction Existing models
Leader Creative
Experimental
Case Based
Findings
Overview Prologue XCCY Asset Swap Processes Project Examples
Solutions Ancillary Tasks Learnings & Scope
For internal use only
07/01/2011 – v35.0
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IDEA EVALUATION
thought
Findings
Experimental Findings
• Availability of more original ideas, ideas provided by followers, would
stimulate leader creativity.
• Use of certain standards in idea evaluation and revision influenced
creative thinking on the part of leaders.
Experimental
Conclusion
Experiment
148 undergraduates were asked to assume the role of a marketing
manager. Their task was to review the ideas provided by teams working
on advertising campaigns for a new product—the holographic television
10. Experimental
Overview Prologue XCCY Asset Swap Project Solutions Ancillary Introduction Existing models Tasks Learnings & Scope
For internal use only
07/01/2011 – v35.0
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IDEA EVALUATION
Leader Creative
thought
Processes Examples
Experimental
Findings
Conclusion
Case Based Findings:
J.P.Morgan, the world famous investor
Findings
(Idea evaluation of Edison’s light bulb through an active approach)
Henry Chauncey, the founder of the Educational Testing Service (ETS)
(Idea Evaluation of a test of practical judgement)
Case Based
Findings
Implications:
These cases, along with the findings obtained in the experimental study
previously described, suggest that idea evaluation may stimulate leader
creativity, but only when the standards applied in idea evaluation support the
generative revision of ideas. Indeed, on tasks where creativity is not called
for, leaders’ evaluative efforts may not encourage creative
thought
11. Introduction Existing models
Leader Creative
Experimental
Experimental
Case Based
Overview Prologue XCCY Asset Swap Processes Project Examples
Solutions Ancillary Tasks Learnings & Scope
Findings
CONCEPTUAL COMBINATION AND IDEA GENERATION
Experiment
In this study, 190 undergraduates were asked to assume the role of a
school principal who had just taken over a new experimental secondary
school. Initially, participants were asked to read through a description of
the school they would be responsible for leading. They were then
informed that their task would be to form a new educational curriculum for
the school based on the use of cooperative learning techniques
For internal use only
07/01/2011 – v35.0
Conclusion
10
thought
Findings
Experimental Findings
• Heuristics or operations involved evidenced the expected pattern of
relationships
• People who were more skilled in applying the relevant heuristics to the
material presented produced instructional models of higher quality and
originality
• principle-based approach led to solutions of higher quality and originality
when a larger number of example learning programs were provided, while a
case-based approach led to solutions of higher quality and originality when a
smaller number of learning programs were provided
12. Experimental
Case Based
Findings
Overview Prologue XCCY Asset Swap Project Solutions Ancillary Introduction Existing models Tasks Learnings & Scope
For internal use only
07/01/2011 – v35.0
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Leader Creative
thought
Processes Examples
Experimental
Conclusion
Findings
CONCEPTUAL COMBINATION AND IDEA GENERATION
Case Based Findings:
Illustration of the use of this kind of case-based reasoning
Richmond Terminal Rescue
Ford’s application of cases
Chauncey’s interest in projective personality test
Implications:
• Creative thought on the part of leaders will require substantial domain
relevant experience
• Leader creativity, moreover, is likely to increase not only when a number
of prior cases are available, but also when a wide range of cases are
available that might be applied to the problem at hand
• Leaders are likely to benefit when they have practice applying cases,
along with their associated heuristics, in addressing relevant problems.
13. Introduction Existing models
Leader Creative
Overview Prologue XCCY Asset Swap Processes Project Solutions Ancillary Tasks Learnings Conclusion
& Scope
FEEDBACK
Experiment
148 undergraduates were asked to assume the role of a marketing
manager. Their task was to review the ideas provided by teams working
on advertising campaigns for a new product—the holographic television
For internal use only
07/01/2011 – v35.0
12
thought
Experimental Findings
• Availability of more original ideas, ideas provided by followers, would
stimulate leader creativity.
• Use of certain standards in idea evaluation and revision influenced
creative thinking on the part of leaders.
Experimental
Findings
Case Based
Findings
14. Overview Prologue XCCY Asset Swap Project Solutions Ancillary Introduction Existing models Tasks Learnings & Scope
For internal use only
07/01/2011 – v35.0
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Leader Creative
thought
Processes
Experimental
Findings
Case Based
Findings
Conclusion
FEEDBACK
Case Based Findings:
J.P.Morgan, the world famous investor
(Idea evaluation of Edison’s light bulb through an active approach)
Henry Chauncey, the founder of the Educational Testing Service (ETS)
(Idea Evaluation of a test of practical judgement)
Implications:
J.P.Morgan, the world famous investor
(Idea evaluation of Edison’s light bulb through an active approach)
Henry Chauncey, the founder of the Educational Testing Service (ETS)
(Idea Evaluation of a test of practical judgement)
15. Overview Prologue XCCY Asset Swap Project Solutions Ancillary Introduction Existing models Tasks Learnings & Scope
For internal use only
07/01/2011 – v35.0
CONCLUSION
Leader Creative
thought
Processes
Experimental
Findings
Case Based
Findings
Conclusion
16. Overview Prologue XCCY Asset Swap Project Solutions Ancillary Tasks Learnings & Scope
PROCESS: IDEA EVALUATION
Change in XCCY ASW Levels over last year
For internal use only
07/01/2011 – v35.0
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4.1 CURRENT LEVELS 4.2 HISTORICAL ANALYSIS
Sample Trade Idea 1
Japanese Government Bonds (JPY) on ASW in SGD:
Example: JGB 2017 at 6m Sibor + 11 bps Semi, ACT/365
Pickup over similar domestic bond ~ 50 bps
Sample Trade Idea 2
French Government Bonds (EUR) on ASW in SGD:
Example: FRTR 2018 at 6m Sibor - 21 bps Semi, ACT/360
Pickup over similar domestic bond ~ 20 bps
1 2 3 4 5 10 15
EUR -26 -8 -10 -18 -18 -33 -28
SGD 31 21 15 -13 -10
USD 5 6 6 6 12 -2 -15
GBP 4 -1 -9 -14 -14 -23
SEK 11 13 11 3
NOK 38 38 48
DKK 19 31 14 7 -26
AUD 27 -34 35 23
NZD 27 11
JPY -7 -4 -8 -15 -21 -28 -24
ZAR 5 -9 -16 -31 -43
CAD -1 12 -3 -60 -24
CHF 12 7 5 -2 0 -14 -13
HKD 3 40 -13 15 19 25
C
U
R
R
E
N
C
I
E
S
BOND TENURE
Proceeds ASW levels in SGD
Basis in other currency pairs against basis in SGDJPY
1
2
Macro-Structuring Desk: Cross-Currency Asset Swap Opportunities for Asia
2
1
17. Overview Prologue XCCY Asset Swap Project Solutions Ancillary Tasks Learnings & Scope
For internal use only
07/01/2011 – v35.0
Deliverable Status Quo Solution Impact & Scope
FX
Target Profit
Forward –
Scenario
Analysis
- High volume trades
- Back to back trades
- USDCNH high volatility
- Central Bank of Hongkong & Taiwan:
risk disclosure compulsory
- Reduces
turnaround time
~20 mins
- High accuracy
Rates
Index-linked
Swaps –
Pre-trade
Analysis
-Pre-trade tests for marketing pitch
- Gauge sensitivity to index & rates
- Reduces
analysis time by
~25 mins
- High accuracy
Trade-finder
Object
Parser
- Post-trade analysis for Summit trades
- Dictionary data from Tradefinder
unreadable by DBAnalytics
- Reduces time to
analyze a trade
by ~15 mins
- High accuracy
Credit
Country
Identifier
- Noisy client data from regional banks
- Difficulty in mapping country to
address
- Impact of regulations & taxes
-Reduces
turnaround time
by ~1 hour
- Onshore
appreciation
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5. ANCILLARY TASKS – PROCESS OPTIMIZATION
Trade Structure
Solution
Best case, Worst case, Average
case analysis
Swap Structure
Solution
Historical backtest, scenario
and breakeven analysis
Dictionary
Data
DBA
Object
DBA
Object
Solution
Address
List
Country
Country
Solution
Macro-Structuring Desk: Cross-Currency Asset Swap Opportunities for Asia
1
2
3
4
18. Overview Prologue XCCY Asset Swap Project Solutions Ancillary Tasks Learnings & Scope
For internal use only
07/01/2011 – v35.0
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6. LEARNINGS & SCOPE
6.1 MARKET COMMENTARY
- Internally circulated macro-economic, rates & FX
related market news
- Major themes
- Political & world affairs (policies and situations)
- Central Bank watch (rates and their impact)
- Economic indicators (Inflation data, industry
output, price-wage spiral)
6.2 VALUE-ADDED
- Project Future Scope: Efficient trade identification;
Automatic MTM Updates; Analyzing varying periods
- Ancillary Tasks: Suite of task optimization solutions
- Morning Commentary
- On-shore trip: Sales, Trading and Structuring fit;
Exposure to other activities of a bank
- Multiple floor-walks & sessions: Overall bank work
6.3 DEMONSTRATIONS
XCCY-ASW
Project
TPF
Scenario
Analysis
Index-
Linked
Swaps
Analysis
Tradefinder
Object
Parses
Country
Identifier
Macro-Structuring Desk: Cross-Currency Asset Swap Opportunities for Asia
19. Overview Prologue XCCY Asset Swap Project Solutions Ancillary Tasks Learnings & Scope
For internal use only
07/01/2011 – v35.0
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THANK YOU
Siddhant Goenka
Macro-structuring Desk
IIM Ahmedabad
ACKNOWLEDGEMENTS
- Rates Structuring
- Smita Sahai
- Ria Ghosh
- Adithya MR
- Vignesh Ramanathan
- Rohan Trivedi
- Lincoln Neo
- Debdutta Choudhuri
- FX Structuring
- Himanshu Saran
- Sidharth Dubey
- Guidance
- Anand Vilayannur
- Rohit Khanna
- Vipin Chaudhary
- Suryadeep Das
- Vivek Varshney
Macro-Structuring Desk: Cross-Currency Asset Swap Opportunities for Asia
28th May 2014
21. Overview Prologue XCCY Asset Swap Project Solutions Ancillary Tasks Learnings & Scope
For internal use only
07/01/2011 – v35.0
BACK
20
1
50 bps
Over SIGB
2
Macro-Structuring Desk: Cross-Currency Asset Swap Opportunities for Asia
20 bps
Over SIGB
*All Spreads over SIBOR
