Risk magazine - Feb 2019
In this issue: banks embrace data science; hedging troubles for Japan banks; lack of experienced staff at Apac board risk committees; SOFR’s slow growth; and much more
Articles in this issue
Dabbling in data science won’t cut it
Banks are seeking data-led boost for research arms – only a few will succeed
Metro Bank loan blunder perplexes industry
Bankers surprised risk-weight errors went unnoticed, warn they could harm bank’s IRB aspirations
Japan banks face huge CVA hit, dealers say
Revaluation of derivatives books likely to cause hundreds of millions in one-off losses
Final FRTB internal model rules get mixed reviews
Bankers divided on whether changes to two key tests will ease ‘penal’ capital charges
BrokerTec outage serves as ‘systemic risk’ wake-up call
January 11 shutdown of dominant US Treasury market platform worries participants
CVA study highlights scale and causes of wrong-way risk
Researchers advise including correlations both with rate level and volatility in CVA calculations
Legislative fix sought for Libor fallbacks
Federal law makes it “almost impossible” to change benchmark rates for FRNs
FCA: ‘We can be Libor fallback trigger’
Amid fears of hedging mayhem, Schooling Latter says FCA verdict could be trigger for smoother rates switch
Caveats and slapped wrists in Barclays’ Brexit swaps switch
Judge blocks transfer of some trades from non-deposit taking entity and slams “unrealistic” timeline
Brexit clouds future for Euribor and Eonia in UK
Clashing deadlines threaten to scuttle rates, but ‘in-flight files’ bill might save them
People moves: Bank of America names new Apac chiefs, Wilkinson leaves LGIM, Lloyds loses Coutte, and more
Latest job changes across the industry
Banks bet on data to rescue research
Barclays, Morgan Stanley, UBS among those using data science to pep up their research offerings
SOFR, so bad: liquidity lags transition ambitions
Thin current trading may lead to poor fallback choices, and dim SOFR’s appeal ahead of Libor’s death
Blazing new analytical paths: Tackling data aggregation for new risk insights
As the risk function’s influence continues to grow within financial services firms, demand for quality integrated risk data to support a wider range of business-critical decisions is stretching the capabilities of existing technology to breaking point. A…
Dawn of CVA threatens hedging woe for Japan banks
Japan’s thinly traded CDS market will make CVA hedging challenging, dealers say
Aussie banks: a right Royal mess
Misconduct probe sparks board changes and bout of introspection at Big 4
Apac bank boards: light on risk experience
Survey of 24 large Apac bank board risk committees shows dearth of risk managers
Non-payment insurance grows as banks shun stuttering CDS market
Credit portfolio managers explore insurance contracts to offset risk from loan book
Eurostoxx dislocations signal autocall hedging pain
Swings in dividends and volatility reveal year-end stress as European index slump tests “peak vega”
Prop traders sound warning over EU capital regime
Non-banks fear topsy-turvy capital requirements under new rules based on clearing margin
Basel haircut floors threaten securities financing desks
Banks fear capital hit unless regulators provide exemption for stock borrowing
Quants use AI to cut through murk of ‘sustainability’
Separating the wheat from the chaff is fundamental to ESG investing. Machine learning can do that
AI moves into middle office at energy firms
Energy firms explore how artificial intelligence can boost returns
We need to talk about Collins
Standardised capital has become the binding constraint for all US G-Sibs bar Goldman and BNY Mellon
Goldman edges closer to Collins floor
Six of the eight US G-Sibs are currently below the Collins floor
Shareholder giveaways deplete US G-Sib capital
Aggregate CET1 ratio robust at 12.1%
Stock slump dents income, hikes VAR by 22% at UBS
Income from equity derivatives trading plummeted $47 million quarter-on-quarter
Banks divided on op risk approaches
EU banks favour standardised approach, North American and Australian lenders the AMA
Standardised approaches lose out in FRTB update
Ratio of standardised approach to IMA capital estimated to increase
Apple derivatives use surges
Hedging derivatives notionals hit $99 billion, up from $6 billion in 2008
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: falling default risk for China’s banks
Economic data may be relatively gloomy, but default probabilities for lenders fell sharply last year
Swaps data: SOFR volume and margin insights
Data shows recent leap in SOFR trades – and hints at growth in synthetic swaps
Calling out autocallable pricing
Quants show popular autocallable pricing technique has a flaw that has been ignored until now
The interplay between stochastic volatility and correlations in equity autocallables
Study shows issues with pricing autocallables using SLV
Nomura plans more hires in equity derivatives, eyes China
Unit head also sees potential in Hong Kong listed market and in demand for bespoke products
