I have asked on this blog what could be the next big thing in financial markets in the coming decade. The last 10 years was dominated by emergence from scratch of the originate-to-distribute credit risk model, when banks lend the money, collateralized and sold these loans to wide group of investors. This model collapsed in 2007 with the crisis in the US subprime mortgage market.

I [I have asked on this blog what could be the next big thing in financial markets in the coming decade. The last 10 years was dominated by emergence from scratch of the originate-to-distribute credit risk model, when banks lend the money, collateralized and sold these loans to wide group of investors. This model collapsed in 2007 with the crisis in the US subprime mortgage market.

I](http://www.rybinski.eu/?p=520&language=en) the following alternatives:

  • Think outside the box. Will new markets be focused on innovation (most important factor of growth in XXI century). Imagine Innovation Default Swaps (IDS), imagine commoditizing these revenues and bundling them into Constant Proportion Innovation Default Obligation (CPIDO).
  • Or maybe the next big wave will be about regions (massive financial developments in Asia and stagnation in US and in Europe)
  • Or maybe the next big think will be about intellectual capital (measured for companies, regions, countries). Maybe investors will be short IC for Tuscany, Berlin and Coca Cola and long IC for Singapore and Huawei (names used as examples only).
  • Maybe gold will return as a big thing
  • Or maybe there will just be a stagnation, wound-licking and no developments.

However, the recent interesting [I have asked on this blog what could be the next big thing in financial markets in the coming decade. The last 10 years was dominated by emergence from scratch of the originate-to-distribute credit risk model, when banks lend the money, collateralized and sold these loans to wide group of investors. This model collapsed in 2007 with the crisis in the US subprime mortgage market.

I [I have asked on this blog what could be the next big thing in financial markets in the coming decade. The last 10 years was dominated by emergence from scratch of the originate-to-distribute credit risk model, when banks lend the money, collateralized and sold these loans to wide group of investors. This model collapsed in 2007 with the crisis in the US subprime mortgage market.

I](http://www.rybinski.eu/?p=520&language=en) the following alternatives:

  • Think outside the box. Will new markets be focused on innovation (most important factor of growth in XXI century). Imagine Innovation Default Swaps (IDS), imagine commoditizing these revenues and bundling them into Constant Proportion Innovation Default Obligation (CPIDO).
  • Or maybe the next big wave will be about regions (massive financial developments in Asia and stagnation in US and in Europe)
  • Or maybe the next big think will be about intellectual capital (measured for companies, regions, countries). Maybe investors will be short IC for Tuscany, Berlin and Coca Cola and long IC for Singapore and Huawei (names used as examples only).
  • Maybe gold will return as a big thing
  • Or maybe there will just be a stagnation, wound-licking and no developments.

However, the recent interesting](http://blog.riskmetrics.com/2007/12/looking_beyond_the_bali_climat.html) on the Riskmetrics blog suggests that the next big thin could be trading in environmental derivatives (carbon in particular). A quote from the blog:

“So why does all of this matter to investors? First, it means that global warming is no longer a debate about science, but rather one about politics and economics. Second, it means that carbon emissions are going to become a big factor in global trade, with industrial countries earning credits for clean technologies that they help finance and deploy in emerging markets. And third, and most important, it means that carbon will come with a market price on emissions, which will have a profound effect on future investment decisions.

One investment banking analysis released just yesterday projects that carbon dioxide emissions now being traded in Europe will rise to 35 euros ($50) per tonne for allowances traded in 2008 and beyond. In the power sector, that would have the effect of making new gas-fired power plants competitive with new coal-fired ones, even though coal fuel costs are 50 percent cheaper than natural gas. The ripple effects would be felt throughout many industries that are heavy electricity or fossil energy consumers.

At the same time, carbon pricing is also going to have a profound effect on commodities trading, investment and lending decisions, asset liabilities and credit ratings. Just last week, four major banks teamed up with the New York Mercantile Exchange to announce the formation of the Green Exchange, a new commodities exchange that will offer a range of environmental futures, options and swap contracts for climate change-focused markets, starting in early 2008.

Also stay tuned for a RiskMetrics report to be released next month—commissioned by Ceres and the Investor Network on Climate Risk, an investor coalition with $4 trillion in assets under management—that analyzes how climate change will affect all facets of the banking industry. We’ll be holding a webcast with Ceres in early January to discuss the report.”

Let me know what you think? What is the next big thing?