Risk magazine - Feb 2025
Cover detail:
Madeleine Love, After Tiepolo, 2016,
Ink and pigments on archival paper, 110 x 75cm
www.anne-mariebainbridge.co.uk, am.b@btopenworld.com
Articles in this issue
Banks divided over CME’s done-away model for UST clearing
Buy side could give thumbs-up if questions on margin protection and guarantee fees are answered
CRR III hangs in the balance as member states push for changes
Top EU lawmaker rejects calls to water down capital rules, while others see room for manoeuvre
Looming US Basel endgame redraft sparks calls to save IRB
Experts say 20 years of data makes credit risk models more appropriate than standardised approach
BlackRock tests ‘quantum cognition’ AI for high-yield bond picks
Study uses Qognitive machine learning model to find liquid substitutes for hard-to-trade securities
Hedge funds could look to bypass UST clearing mandate
New paper argues that repo users might relocate offshore or use other means to avoid US Treasury clearing dragnet
Esma climbs down on active account reporting rules
Industry in ‘wait-and-see mode’ after Löber comments suggest softer approach by EU regulator
EU bond-futures basis flip spells curtains for netting
Alignment with US positions brings higher balance sheet usage, while low returns also a turn-off say traders
People: Shake-up at Goldman, new op risk posts, and more
Latest job changes across the industry
During Trump turbulence, value-at-risk may go pop
Trading risk models have been trained in quiet markets, and volatility is now looming
AI and Trump tariffs spur hyped-up dispersion trade
Popular vol strategy pays off in January despite highest entry costs on record
Quants try investing like Socrates, with help from AI
Researchers are testing whether LLMs can use methods borrowed from ancient philosophy to answer complex questions
Basel uniformity fades as members defy dress code
Rule-makers diverge from Basel III standards, denting aims of comparability and fuelling fears over fair competition
Value-at-risk models face neglect due to FRTB uncertainty
Some banks delaying material upgrades until timeline to replace VAR becomes clearer
EU banks show basic instinct for credit valuation adjustments
Simpler approach to CVA appeals even to some already using more complex models for counterparty risk
Margin standards are here – and clearing firms aren’t happy
Clearing members complain that latest transparency proposals would force them to act as middlemen by providing margin simulation tools for clients
Crossed signals: row over collusion pits scholars against traders
An Oxford study claims to show evidence of collusion in ETF markets. Some traders give it short shrift
Corporates eye complex FX hedges as carry costs mount
Leveraged forwards and options-based structures entice treasurers facing rates uncertainty and FX volatility
Legal battle over Italian swaps drags on, frustrating dealers
Despite banks claiming victory in London over disputed interest rate swaps, parallel Italian proceedings could delay payouts
More guidance, less enforcement: the SEC under Paul Atkins
Current and former insiders expect clearer crypto rules and an end to regulatory violation sweeps
JP Morgan, Eurex push for DLT-driven collateral management
The high-stakes project could be a litmus test for the use of blockchain technology in the capital markets
Front office open to AI promise
AI offers real potential for capital markets firms. But how disruptive, and how immediate, will the impact be?
Start planning for post-quantum risks now
Next-gen quantum computers will require all financial firms to replace the cryptography that underpins cyber defences, writes fintech expert
Cool heads must guide financial regulation of climate risk
Supervisors can’t simply rely on ‘magical thinking’ of market discipline, says Sergio Scandizzo
How a serverless risk engine transformed a digital bank
Migrating to the cloud permitted scalability, faster model updates and a better team structure
JP Morgan logs two VAR breaches as trading revenue slumps
Largest trading loss in Q4 reached 262% of the bank’s VAR limit, matching a breach reported at the height of the Covid-19 pandemic
UBS blunts Basel III RWA impact, gains time for Credit Suisse integration
Bank secures valuable time to integrate legacy assets and prepare for forthcoming regulatory challenges
Japanese banks’ bond strategies diverge amid interest rate shifts
MUFG increases JGB portfolio duration to four-year high, while SMFG and SMTG take opposite bet
US regionals predict prolonged AOCI burndown
Six banks adjust capital projections amid rising unrealised losses in Q4
Podcast: Lyudmil Zyapkov on the relativity of volatility
BofA quant’s new volatility model combines gamma processes and fractional Brownian motion
The relativity of the fractional Gamma Clock
Bank of America quant expands his Gamma Clock model with a fractional Brownian motion
Option market-making and vol arbitrage
The agent’s view is factored in to a realised-vs-implied vol model
