Risk magazine - May 2022
This month’s issue covers the gaps in the Paul Weiss report on Archegos, why fraud rises in roiling markets, the perils of ruble trading, and much more
Articles in this issue
Only regulators can clear up Credit Suisse’s Archegos mess
Shareholders were right to keep officers and directors on the hook until all the facts are known
Rate-linked notes trigger ‘pain trade’ for dealers
Negative 2y30y US swap spread sees hedging costs for range accruals soar, fuelling more flattening
Banks face conduct risk threat as term SOFR trading grows
Trades linked to forward benchmark at risk of falling foul of strict client hedging remit, lawyers warn
CDS users mull ‘uniform’ price as Russia fallback
Pricing agreement could replace dealer estimates if sanctions scupper default auctions
Yen exotics re-hedging fuelled vol surge, say traders
USD/JPY spike forced dealer stampede into call options, pushing FX vol even higher
Flow Traders to offer prices on first bond market run on DLT
The first bond market run on a private blockchain gives non-banks an opportunity to take market share
Isda set to draft China netting opinion
Banks could be in a position to turn on close-out netting in China by third quarter
People moves: Credit Suisse reshuffles, CME continues rejig, and more
Latest job changes across the industry
Archegos revisited: the gaps in Credit Suisse’s story
Ahead of shareholder vote, former execs point to gaps in key report – raising new questions about accountability
In roiling markets, fraud rises. Banks want to understand why
Disruption from Ukraine and Covid puts managers on alert for misconduct, as risk controls are stretched to the max
Offshore waves: how the ruble is becoming a painful trade
As liquidity dries up in markets affected by sanctions, trading is shifting from electronic venues
Peacetime stress‑testing applications
Leo Sadovy, analytics consultant, risk, finance and banking, and solution lead for SAS‘s scenario analysis and stress-testing solution, sets out the key role of strong decision-making and the importance of being able to innovate and respond to adverse…
Emission impossible? Why voluntary offsets may not be scalable
As finance looks to shape decarbonisation in its own image, critics wonder if its efforts are misplaced
Isda broadens FRTB carbon trading study to win over sceptics
New study shows risk weights too high for US markets, but data from 2008 still missing
SA-CCR hits Citi’s FX forwards pricing
Four clients say US bank has quoted “less competitive” spreads as a result of new capital regime
Stablecoins’ would-be lawgivers don’t know what they’re missing
Bills in US Congress focus on run risk, but more detail needed on operational challenges
The rise of non-financial risks
Naeem Siddiqi, senior adviser, risk management, risk research and quantitative solutions at SAS, discusses the effectiveness of stress-testing as a risk management tool in rapidly changing markets, the role of new technologies in developing robust data…
Have corporate bond markets outgrown the plumbing?
Regulators must examine both investor demand and dealer liquidity supply, say Iosco experts
Banks turn to analytics playbook to take on FX platforms
Dealers aim to lure clients from high-fee multi-dealer platforms with improved investment analytics
Buckle up for the bitcoin legal revolution
The brave new world of crypto derivatives needs new thinking for its legal framework, says D2LT CEO
The $1 trillion shortfall if private equity bets turn sour
Investors have to keep sending money to private equity firms even if returns crumble, says hedge fund executive
JP Morgan takes $524m XVA loss on nickel, Russia trades
Margin calls, markdowns and rising funding costs result in biggest XVA loss since early 2020
Ice Clear Europe hit by $1.03bn margin breach
The CCP’s futures and options division reported its second largest IM breach ever in Q4, as energy prices skyrocketed
US trading blunder costs Barclays £2.8bn in credit RWAs
The latest hit follows a £540 million provision to cover the over-issuance of structured notes
UBS settlement risk up 238% as sanctions snag Russia trades
Held-up and failed counterparty transactions add almost $1bn to RWAs
Standardised approach extends reach over US banks’ RWAs
Gap between standardised and advanced RWAs at its widest ever for BofA, BNY Mellon, Morgan Stanley and Wells Fargo
Fair-value losses derail payout plans at State Street, BNY
Hit to capital adequacy from available-for-sale book forces rethinks on rate sensitivity
How to model potential exposure, post-Archegos
BofA quant’s model considers the correlation between market shocks and counterparty defaults
Mind the gap
A default intensity model reveals the risk carried by a highly leveraged counterparty
Automated market-making for fiat currencies
A framework to exchange fiat currencies on-chain consistently with off-chain prices is presented
Chebyshev Greeks: smoothing gamma without bias
A numerical method to obtain stable deltas and gammas for complex payoffs is presented
Carbon fund increases returns by decreasing supply of permits
Europe’s emissions trading system could be a catalyst for the energy transition, but only if prices rise
