Risk magazine - Dec 2023
In this month’s collection: A CLO war, banks drop internal models for market risk, the Risk Awards, and much more
Cover detail: Alice Mansfield,
Untitled, Oil, acrylic and charcoal on canvas, 140 x 120cm
Contact: Anne-Marie Bainbridge, www.anne-mariebainbridge.co.uk
Articles in this issue
Risk Awards 2024: The winners
JP Morgan wins derivatives house, lifetime award for El Karoui, Barclays wins rates
Margin failings raise concern over Treasury basis trade
Opaque models at clearing houses cast doubt on calculations for concentration add-on
Buy-siders bemoan ‘dark arts’ of corporate bond CSA discounting
Litany of pricing variables fuel wide differences in how dealers calculate discount rates for collateral agreements
CME’s Span 2 margin model generates systems headaches
Market participants welcome smarter margin requirements, but not the computational workload
Bank QIS teams take zero-day options plunge
JP Morgan sees better risk/reward profile for 0DTE-based trend strategies
Bloomberg calls time on BSBY
After damning Iosco verdict, no commercial future seen for credit-sensitive rate
New developments in XVA: bank strategy in a changing world
Derivatives valuation has grown in complexity since the the financial crisis that began in 2007–08. It now encompasses a broader range of risk factors, including credit, funding, margin and capital – all of which can affect banks’ competitiveness and…
People: All change at Citi, new FX head at Nomura, and more
Latest job changes across the industry
How US insurers went to war over CLOs
Mutuals and private equity-backed rivals clash over determination of capital charges
Party’s over as more banks drop internal models for market risk
At least three systemic banks in Europe intend to ditch IMA for capital requirements
FRTB managers face hard facts about risk factors
There are ways to reduce the capital charges caused by NMRFs, but they come at a price
Filling the gaps in Basel’s interest rate risk measures
Reverse stress-testing or VAR may work better than existing outlier tests, but are hard to manage
Hard concentration: clearing members want clarity from CCPs
FCMs complain they struggle to pass opaque margin calculations through to end-clients
Three’s a crowd? Eurex and Ice battle CME for €STR trading
Chasing exchanges represent 75% of trading volume, 28% of open interest in first weeks of push
Industry unsure of SEC’s new short-selling transparency rule
Requirement aims to provide sufficient transparency while protecting traders from a GameStop-style backlash
The evolution of trading risk and the return to volatility
Risk managers are grappling with the complexities of today’s financial markets, tackling what seems to be a never-ending stream of crises, exacerbated by surging interest rates and widening credit spreads. In a recent Risk Live North America panel…
Quantum computing: a problem for another generation?
Some banks have soured on quantum exploration. Others are playing a game of wait and see.
How long can the Magnificent Seven keep winning?
History suggests the dazzle of today’s star tech stocks will likely fade
Off target: SEC dealer rule will hurt those it aims to protect
Regulator’s plan could harm US Treasury markets and make it costlier for Americans to borrow, says Don Wilson
Why ‘access all areas’ will be key for OTC derivatives
Without guaranteed pathways to CCPs, mandatory clearing could threaten financial stability, say Patrick Pearson and Bas Zebregs
Leading-edge LLM approaches: predictive analytics for M&A targets
Utilising LLMs, LSEG’s StarMine Mergers and Acquisitions Target Model is transforming the landscape for M&A target predictions. LSEG’s Nelson Chin and Richard Goldman discuss the company’s ongoing innovation in data analytics
At US banks, paper losses on HTM securities hit new high
Bank of America leads way as mortgage-backed securities drive aggregate rise in Q3
HSBC’s rate-hedge reset to generate $1bn bond loss
Unwind of lower-yielding bonds costs $578m in Q3, with another $400m expected by year-end
VAR breaches trip up Citi, CS USA and two others in Q3
Comerica’s VAR multiplier ratchets up while Huntington’s remains at record high
Indian CCPs derecognition costs BNPP, Deutsche €6bn in RWAs
Esma’s decision forces re-weighting of local exposures by EU dealers
HQLAs slide to multi-year lows at largest US regionals
Drops make US Bancorp, PNC and Truist ever more dependent on reduced LCR
Degree of influence 2023: Quants thrive on volatility
Climate, crypto and market impact also featured among the top research topics in 2023
Neural joint S&P 500/VIX smile calibration
A one-factor stochastic local volatility model can solve the joint calibration problem
Leveraged wrong-way risk
A model to assess the exposure to leveraged and collateralised counterparties is presented
Buy-side traders opt for derivatives automation in pursuit of timing and pricing precision
Increased capacity and efficiency have been key drivers of automation, with the introduction of new technologies at the trading venue level facilitating the implementation of new trading styles. Exploring the impact of high-volume trading and expanding…
Generative AI is changing debate on explainability, says Deutsche
Innovation head says observability can aid regulatory acceptance
