Articles by Laurie Carver
Back-testing expected shortfall: mission possible?
Expected shortfall is hard to back-test, critics say – but the search for a solution is underway
Replacing VAR: smaller banks fear expected shortfall workload
Some banks worry they may not have enough data to implement expected shortfall safely
Basel securitisation rules revisions criticised
While the December proposals incorporate many of the industry's comments, banks claim the rules are still too harsh
Basel gives on securitisation capital – but industry still unhappy
Proposals on proposals
Cutting Edge introduction: living la vida local
Living la vida local
Banks ask Basel Committee to delay trading book impact studies
Completing the two studies on schedule will be "nigh-on impossible" bankers claim – but regulators are thought to be wary of a postponement
Inflation derivatives house of the year: Barclays
Inflation derivatives house of the year: Barclays
Cutting Edge introduction: another FVA?
Including funding costs and benefits in derivatives prices is a controversial topic, closely tied up with the credit and debit valuation adjustments of counterparty risk. But new research suggests that, even with no default risk, differences in the…
CVA desks could struggle with Volcker correlation tests
Banks turn to lawyers for advice as CVA functions face tougher conditions than other trading desks
Cutting Edge 2013: fixing SABR
Fixing SABR
Cutting Edge introduction: fixing FVA
The funding valuation adjustment (FVA) is the biggest controversy of recent times in quantitative finance. Now the authors of the original FVA paper are back – and think there may be a solution. Laurie Carver introduces this month’s technical articles
ROE hurdles cause pricing impasse
In the Basel III world, traders know their business must deliver a target return on equity, or risk being shut down – but working out the capital cost, or benefit, of a trade at inception is so difficult that banks only have approximations to guide them…
French life insurers face lapse risk hedging problems
French life insurers have to pay back their customers at the drop of a hat – an exposure that rises in tandem with interest rates, as customers seek better returns elsewhere. But with the industry’s traditional hedge for this risk now too pricey,…
Cutting Edge introduction: systematic systematic factor models
Credit factor models tend to obscure the economics in favour of tractability – and this puts them at odds with rigorous arbitrage-free martingale pricing methods. To resolve this, quants are looking more closely at what a systematic risk factor actually…
Basel Committee drops fixed correlations in new trading book proposals
Banks relieved as revised trading book proposals drop plans for capital to be based on regulator-set correlations
Capital or P&L? Deutsche Bank losses highlight CVA trade-off
Critics of Basel III’s credit valuation adjustment (CVA) capital charge have long warned it would produce perverse incentives. Now, in the form of a string of quarterly losses in Deutsche Bank’s CVA hedging programme, they believe they are being proved…
Deutsche Bank's €94 million CVA loss was "good business", dealers say
Big loss was accompanied by even bigger capital saving, traders point out. Other banks now working out their own policy on controversial capital charge
Cutting Edge introduction: pricing the CVA doom loop
Pricing the CVA doom loop
Capital relief accounts for 70% of some CDS spreads, quants say
New research sheds light on implications of product's role as regulatory capital hedge
Liquidity & Funding Risk 2013: FVA will be dead in three years, says Hull
Arch-critic of funding valuation adjustment says regulation will make it obsolete – reducing industry's exposure to arbitrage
Banks at risk of FVA arbitrage, say Hull and White
Academics who ignited fierce debate on funding valuation adjustment return with new paper
The CCP price: users fear modelling mishaps
The CCP price
Barclays and JP Morgan among first to centralise ‘XVA’ desks
Dealers are looking to consolidate desks that manage adjustments for credit, debit and funding valuation