Risk magazine - Mar 2019
In this issue: how to survive in the euro rates desert; machine learning for corporate risk solutions; CCP auctions post-Nasdaq; and much more
Articles in this issue
The low flow blow
Traders can’t make flow rates business hot again, but their colleagues in tech and ops might be able to
‘Imperfect hedge’ magnified equities slump at BNPP
US index loss, dislocations and weak demand produce worst equity trading results in a decade
Natixis said to offload a third of Korean structured book
BAML and BNP Paribas named as buyers in $2.5 billion notional sale of equity-linked securities
Libor may linger as regulators ‘change tune’
CFTC and FCA suggest benchmark could be kept alive to avoid cash market chaos
First SOFR term rate coming in 2020
Staff at the New York Fed are working on a series of backward-looking averages
LCH plans 2020 switch to SOFR discounting
Users opt for one-step switch to new US dollar regime, as long as CCP cooks up compensation scheme
Regulators to scrutinise CCP default auctions
CPMI-Iosco preps discussion paper as banks warn further guidance needed after Nasdaq default
UK quant academics fear Brexit brain drain
Brexit hitting graduate jobs, funding and “driving European academics away from the UK”, say universities
Giancarlo opens door for prop firms to quote swaps
CFTC will grant no-action relief to non-banks that want to provide liquidity in cleared swaps
People moves: SocGen changes at the top, new global markets head at HSBC, compliance switch at Natixis, and more
Latest job changes across the industry
Dealers suffer in euro rates desert
Analysis shows collapse in swap and bond bid/offer spreads, as traders say business is “unsustainable”
Banks use machine learning to ‘augment’ corporate sales
Big banks are embarking on massive projects to tie up machine learning and big data to sell better to clients
Banks hope final FRTB rules will ease NMRF burden
Internal models approach buoyed by more liberal rules on price observations and risk factor aggregation
Clients feel forgotten by Giancarlo’s swaps trading plans
Industry says wider Sef mandate ignores reality of dealer-to-client market
Nasdaq auction failure ignites anti-clearing backlash
CCP members wary of illiquid risks
Hammer horror: banks fear CCP auctions after Nasdaq
Auction failure at Nasdaq sparks debate over who gets to bid on portfolios, and whether they should be pre-hedged
Margin or membership? Regulators react to Nasdaq default
Six supervisors – from Bafin to the MAS – downplay idea of mandatory increase in futures MPOR
Functional programming reaches for stardom in finance
Fans highlight more reliable code, and suitability for complex tasks and distributed ledgers
Buy-siders eye ways to get ahead of US resolution stay rules
Come July 1, asset managers will be unable to dump derivatives as a G-Sib is unwound. Lawyers are standing by
Mifid data publishers drag feet on Esma guidelines
Four publishers yet to align post-trade data format with Q&A issued eight months ago
FRTB 2.0: lower capital but high running costs
Revisions to market risk rules fail to ease complexities of internal models approach
Giancarlo’s last stand: the race to complete Sef reforms
Part of flagship proposals could be left to his successor, putting their fate in doubt
Arnott, Harvey: machine learning dangerous when data thin
Experts warn ML should be used “for its correct purpose”
Asset managers brave patchy data to nowcast China’s GDP
Techniques include using many datasets, relying on proxies and continually reviewing models
The common drivers behind alt risk premia’s difficult year
Statistical analysis shows four strategies caused most pain, but funds suffered differently
CICC looks to China assets for alt risk premia boost
Source of diversification can be found in yuan-denominated assets, says fund’s quant head
Energy Risk Commodity Rankings: the return of geopolitical risk
Geopolitical tensions introduced extreme volatility to many commodity markets in 2018, while environmental markets began to take off
Last orders at the VAR
Inaccurate risk-of-loss estimates threaten to load extra capital charges on US dealers
At US G-Sibs, 11 VAR breaches in 2018
The final quarter of 2018 saw a record number of VAR breaches at the biggest US banks
VAR surges, revenues tank at French banks hurt by volatility
Revenues decline €1.2 billion at big four banks' trading arms
EU Pillar 2 charges vary by country
Nordea leads large EU banks' with Pillar 2 requirement of 3.2% in 2018
JP Morgan's repo book bulged at year end
US bank added $101 billion of repo assets in three months to end-December
US G-Sibs’ VAR-based charges jump 23% in Q4 2018
On aggregate, the eight G-Sibs posted a VAR-based capital charge of $2.9 billion
UK banks build liquidity buffers ahead of Brexit
Four high street lenders boost HQLA by 11% in 2018
Op risk data: $1.5bn subprime hit for GE Capital
ED&F Man’s commodities loss; cyber events spiral in 2018. Data by ORX News
Credit data: a new PD story for Brazil and Mexico?
One has been sliding, the other stable, but the stage appears to be set for a break from those trends
Swaps data: SOFR swaps slip, futures flip
After a banner month for the young OTC instrument in January, volumes then halved
Could machine learning improve CVA and IM calculations?
Banks have built ways to calculate CVA more quickly, but neural networks could offer more accurate method
CVA and IM: welcome to the machine
Henry-Labordere proposes a neural networks-based technique to price counterparty risk and initial margin
Keep it real: tail probabilities of compound distributions
Igor Halperin proposes new approach to compute probabilities of heavy-tailed distributions
Honesty is key to machine learning’s future – Roberts
Oxford-Man Institute director on why tomorrow’s models will gracefully admit defeat
