Modelling
Applying scenario analysis to climate risk
Matthew Lightwood, director, risk solutions at Conning, discusses the application of stochastic modelling with scenario analysis to quantify climate risk in a portfolio
JP Morgan’s VAR falls to lowest since 2018
Gauge of trading risk drops 20% quarter on quarter, driven by commodities and equity desks
Basel III heralds 41% op risk jump for EU banks
Capital requirements set to rise almost 88% for those G-Sibs that don’t currently use the AMA
Initial margin at LCH Ltd rose in Q2
RepoClear and ForexClear saw biggest increase over the quarter
Weather, or not: is climate risk just part of credit risk?
Practitioners divided on whether climate risk can fit into existing credit risk weights
European banks set for 17.6% capital hike under Basel III
Output floor expected to push Tier 1 capital requirements up 7.3% alone, latest BCBS monitoring report shows
NSCC caught $5 billion short in June
Worst-case losses would have wiped out the CCP’s available liquid resources on two separate days in Q2
EBA set to unveil revised hybrid stress-test framework
Firms fear new bank-run leg in 2023 exam could prove an operational headache
EU banks aim to block new counterparty risk guidance
Requirement to include exposure spikes linked to swap payments within EEPE models prompts blowback
APG hires in-house weatherman to interpret climate data
Europe’s wettest summer in a century prompts asset managers to calculate flood risk for real estate
Citi hits the Collins floor
Of the eight systemic banks in the US, Goldman Sachs remains the only one above the threshold
RBC lifts CET1 ratio by 80bp with model parameter update
Reclassification of small business clients carves out C$26 billion of credit risk
An old model can shed new light on how flows shape prices
Market microstructure theory may also explain long-term patterns in stock markets
Citi leads US banks in shrinking market risk
First aggregate drop in capital charges stemming from market risk since mid-2020
End of SVAR relief hikes market risk at Canada’s ‘Big Five’
Market RWAs increased by C$13.9 billion over the three months to end-July
JP Morgan flirts with VAR limits
Largest trading loss in Q2 reached 96% of bank’s VAR limit
BNY Mellon incurred a VAR breach in Q2
The highest losses-to-VAR ratio was 145.75%, in the first backtesting exception reported by the bank since 2018
NLP and transformer models for credit risk
News feeds are factored into models to predict credit events
Building forward-looking scenarios: why you’re doing it wrong
Rick Bookstaber and colleagues describe a process for constructing effective scenarios
Show your workings: lenders push to demystify AI models
Machine learning could help with loan decisions – but only if banks can explain how it works. And that’s not easy
NatWest gets VAR model approval as transition from Libor continues
The updated model is expected to reverse a £1.5bn increase in markets RWAs next quarter
Model change cuts Barclays’ VAR 21% in H1
Reducing historical lookback period from two years to one shaves £5m off bank’s average VAR
Quants split on who wins in the alt-data gold rush
Scale helps in handling new data, but alpha may be found in niche strategies
UBS revises credit and counterparty risk estimate
Changes to the bank’s models and methodology expected to add $6bn in second half of the year