FVA, correlation, wrong-way risk: EU stress test’s hidden gems
The results of Europe’s bank stress tests caused few ripples when they were published at the end of October. Some interesting results were buried in the data, though – on trading exposures, correlation positions, wrong-way risk and the hidden costs of trading with some sovereigns
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There is a wealth of data in the EU-wide stress test results published on October 26, but only one number made the headlines – the 25 banks that failed to meet a 5.5% minimum Tier I capital ratio under the test's worst-case scenario. The other 105 banks in the exercise were more or less ignored, as were most of the up-to-12,000 data points each bank
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