Risk magazine - Aug 2021
Articles in this issue
The unintended consequences of ring-fencing
Rules aimed at protecting UK depositors may be putting too much froth into the credit market
JP Morgan warns hedge funds to expect intraday margin calls
US bank may demand variation margin ‘up to seven’ times a day after Archegos default
ECB tightens grip on back-to-back booking models
Supervisor could impose large exposures limit for intragroup trades, even if UK granted equivalence
Term SOFR gets cautious blessing for derivatives
ARRC use cases for forward RFR could accelerate derivatives’ availability, though dealers must warehouse basis risk
EBA to consult on banks’ machine learning use
Watchdog will set out stance on ML-based capital models amid conflicting guidance from supervisors
Banks hail UK plan to pare scope of taxing pre-trade reporting
UK wants to exempt bonds and OTC derivatives from Mifid rules on pre-trade transparency
Goldman tackles climate risk controls
Lender joins other banks in translating physical and transition threats into controls framework
People moves: Credit Suisse taps Goldman for new CRO, and more
Latest job changes across the industry
Safety first: UK set to keep ring-fencing but may ease rules
There is also pressure to make changes to tackle banks’ overexposure to retail debt due to the rules
After Archegos, prime brokers put the squeeze on hedge funds
Hedge funds are told they will need to pay more margin, more frequently, to back their trades
Isda’s ‘master’ master agreement courts controversy
Single master agreement to cover repo, securities lending and derivatives could bring efficiencies, but many remain sceptical
After bruising EU model review, banks ask: ‘Why bother?’
Post-Trim changes erode capital savings from internal models while raising their running costs
A BMR-shaped hole in the US Libor transition
US could benefit from copying EU Benchmarks Regulation as market moves to shaky Libor successors
Libor is ending, and corporates need to know their options
Banks must speak to Main Street now if US Libor transition is to succeed, argue ARRC working group leaders
Archegos shows up US swaps reporting shambles
Problems with existing data mean SEC’s pending TRS reporting rules won’t bring the issue to order
Quants turn to machine learning to unlock private data
Replication could allow financial firms to use – and monetise – data that was previously off-limits
How algos are helping inflation-wary investors
Buy-siders look to machine learning for clues on the effect of rising prices on portfolios
UK aims to beat EU in Mifid swaps reporting stakes
UK follows up proposed EU solution to confusion over post-trade transparency with its own fix
Futures aim to put a dent in FX swaps supremacy
Advent of margin rules sharpens appeal of exchange-traded instruments for buy-siders
‘It’s the economy’: forecasting an op risk climate change spike
History of op risk suggests economic impacts of climate change could exacerbate losses, writes op risk head
It’s time to call time on leisurely disclosures by CCPs
When clearing houses falter, markets should not be kept in the dark for months on end
UBS incurred two VAR breaches in Q2
Risk Quantum understands the VAR backtesting exceptions stemmed from the Archegos blowout
End of SLR relief weighs on JP Morgan
All eight US systemic banks saw their supplementary leverage ratio drop in Q2
Wobblier eurozone banks most exposed to climate change
Lenders with lower CET1 ratios and weaker returns could face more credit defaults from global warming
Morgan Stanley sets aside $73m for credit losses
Bank returns to stash reserves triggered by one facility in Q2
Seeking SCB relief, Goldman cuts equity investments
Plans for less capital-intensive balance sheet could shave 140bp off capital requirements
Covid-forborne EU loans sour faster as more exit moratoria
Exposures classified as stage two rose 37% in the first three months of 2021
Derivatives pricing starts feeling the heat of climate change
Quants find physical and transition risks can lead to significant rise in CVA
Capturing the effects of climate change on CVA and FVA
A framework to incorporate climate change risk into derivative prices is presented
Risky caplet pricing with backward-looking rates
The Hull-White model for short rates is extended to include compounded rates and credit risk
The curious case of backward short rates
A discretisation approach for both backward- and forward-looking interest rate derivatives is proposed
This quant firm cut 90% of its compute costs. Here’s how
Quantbot Technologies uses ‘smart data routing’ to stop runaway spending on data and computing
