The Fed’s stress test models are inaccurate. Something has to change

First step for US regulator to improve its bank loss forecasts would be to open up its models to public scrutiny, argue two banking industry advocates

Missing the mark

Stress tests measure how banks perform during a series of economic scenarios. These scenarios are imaginary – but by a twist of fate, the US Federal Reserve’s 2020 stress test used a global market shock scenario that was similar to the actual shock that occurred in March 2020.

One startling statistic emerged from this inadvertent back-test. The Fed’s stress test projected that banks would suffer $83 billion in trading losses. In fact, banks made more than $43 billion in trading revenues in the

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Digging deeper into deep hedging

Dynamic techniques and gen-AI simulated data can push the limits of deep hedging even further, as derivatives guru John Hull and colleagues explain

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