Dealers found a way to protect some cross-currency swaps from heavy new capital requirements last year, by adding foreign exchange options into the structure – but the powers of the technique are limited. Matt Cameron reports
Credit risk factor models tend to have a narrow focus on the Gaussian case, use copula functions that don’t work well with the martingale methods used in pricing, and can introduce arbitrage. Dariusz Gatarek and Juliusz Jablecki show how an increasing...
Capital and funding efficiency is a new discipline for derivatives desks, and there is a shortage of comprehensive systems - so Lloyds Banking Group teamed up with Markit to build one
Vague Volcker bemuses
Handicapped by tighter regulations, banks have ceded derivative market-making share to oil majors such as BP and Shell
Banks turn to lawyers for advice as CVA functions face tougher conditions than other trading desks
Operational risks, funding valuation adjustment and the money made by one dealer in the early days of OIS discounting – the top stories of the year on Risk.net
Rising costs and flexible collateral approaches overcome India resistance to CSAs
Adapt and comply
Funding strategies, funding costs
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...
Asifma head Austen wants exclusion of initial margin from Asian jurisdictions’ derivatives market regulation
Canadian regulator wants its banks to compete on same terms as US rivals
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...
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...
Dealers and pension funds still waiting for clarity on whether hedging vehicles are covered by Europe's swap clearing exemption
Big loss was accompanied by even bigger capital saving, traders point out. Other banks now working out their own policy on controversial capital charge
Banks tout 'tremendous' capital savings as Bank of America, Barclays, Citi and other swap dealers start using illiquid assets as initial margin
Sponsored statement: Absa
Lack of credit team or CVA desk might make use of measure counterproductive, panellists worry
Pricing the CVA doom loop
New research sheds light on implications of product's role as regulatory capital hedge
Sponsored statement: Moody's Analytics
Down the rabbit hole