Risk magazine - Nov 2020
Articles in this issue
Basis trades: a test case for regulating risky activities
FSOC is right to focus on dangerous behaviour, but Treasury meltdown reveals a complex chain of actors
CCP discount switch drives record SOFR swap volumes
Historic move off fed funds discounting leads to trading surge
TSE outage throws structured notes into tailspin
Trading shutdown on October 1 disrupted observation dates for some structured products
Citi turns to fintech to boost FCM interest income
Clearing giant is optimising its treasury function to combat low rates and CCP fee hikes
CCPs mull ‘big bang’ €STR swap conversion
A co-ordinated transition of Eonia contracts is being discussed with members and end-users
CME asks clients about changing implied UST futures coupon
Falling yields prompt review of 6% conversion factor for delivery-eligible bonds
Banks, regulators call for global climate risk standards
Carney and Winters warn private sector cannot move much further without lawmakers
People moves: Citi seeks new CRO as Hu departs, CS hires Meissner, and more
Latest job changes across the industry
Bailed-out basis traders face regulatory backlash
The cash/futures basis trade could be a test case for regulating systemically risky activities
Fight against dirty money falters in blizzard of SARs
Authorities are swamped with suspicious activity reports, many of which are never investigated
Achieving a holistic view of risk in times of crisis
What happens when risks become too global in scope and increasingly uncertain for a business to manage? Jeroen van Doorsselaere, senior director – finance, risk and regulatory reporting value propositions at Wolters Kluwer, explores the key steps to…
Escape from Emir? Not so fast, swaps users
Emir Refit, which seemed to promise reporting relief for corporate users, is not a master key
Unsettling times: why is settlement risk on the rise?
Regulators and market participants searching for answers after BIS figures show substantial increase
Jerome Kemp on the skewed economics of clearing
Only Fed intervention prevented “a really big market disaster” during Covid, says derivatives veteran
Covid policy risk hangs over bank stress tests
Banks and regulators are second-guessing the policy response to new outbreaks
Funding pain prompts calls to rehome FVA
Dealers push to move derivatives funding costs out of P&L following March’s outsize losses
Banks rent ready-made algos for FX trading
NatWest, XTX Markets and others develop new outsourcing model for tech
PBs seek remedy for credit addiction in FX
Group set up after big Citi loss considers limit-checking hub, among other options
Europe’s clampdown on fund outsourcing chills market
Esma proposals spark worries AIFMD review could wreck existing delegation models
Work needed on China financial reforms, says Liu Mingkang
Asia Risk 25: ex-head of China’s banking watchdog urges “rigorous” changes as country opens up to foreign investors
Strengthening supervisory co-operation in derivatives markets
Heath Tarbert and Jon Cunliffe set out a framework for regulating the global derivatives markets
Quants tout alternative carry trades for the ‘new normal’
Low rates and flatlining yield curves leave investors seeking carry in swaps and swaptions
Nordic noir: Swedish state pension fund’s outlook is austere
Sweden’s AP1 aims to ditch illiquid assets and target realistic returns with equities
Broken backtests leave quant researchers at a loss
As historical data loses relevance, quants must find new ways to validate their theories
CalSTRS CIO: new derivatives needed to hedge ESG risks
Second-largest US pension fund has also reduced fixed income allocation to 12% as rates have fallen
Whales or minnows? Sizing up crowded trades
Strategies for measuring crowding in trades can help to avoid its effect, writes quant fund founder
SME risks take centre stage at European banks
Lenders could suffer if government support for small business starts to wane
Initial margin held by top CCPs declined over Q2
Cash collateral held at central banks down 23% across top CCPs
JP Morgan braces for 4% G-Sib surcharge
Fifty-basis point increase to capital ratio looms
BNP Paribas grew share of MMF Treasury repo over Q3
French bank accounted for 13% of traded volume as of end-September
At Santander, Covid relief for €75bn of loans expired through Q3
Sixteen per cent of loans coming out of payment holidays have experienced a fall in creditworthiness
BoJ stress tests pressure top banks’ buffers
Capital ratios of internationally-active dealers projected to fall to 7.6% in worst-case scenario
EBA’s software treatment offers banks meagre capital benefits
Three-year prudential amortisation approach more generous than initial two-year proposal
Breaking barriers in options pricing
A new technique for pricing exotic options unifies two classic models
Finite difference schemes with exact recovery of vanilla option prices
A model unifies the classic local vol and binomial trees to accurately price options
Machine learning hedge strategy with deep Gaussian process regression
An optimal hedging strategy for options in discrete time using a reinforcement learning technique
Finding the corporate credit cycle for IFRS 9
Decomposing corporate default rates helps identify credit cycles
Back to school: BlackRock uses quant quake lessons on Covid
Pandemic prompts a switch in approach from strategic to tactical