Risk magazine - Jul 2021
Articles in this issue
How XVA quants learned to trust the machine
Initial scepticism about using neural networks for derivatives pricing is giving way to enthusiasm
SOFR alternatives remain on track despite regulatory warnings
Pointed criticism from FSOC has done little to dampen interest in credit-sensitive rates
Fed casts doubt on future of Basel internal models in US
Banks warn Fed cannot keep commitment to avoid Basel III capital hike if it forbids models
CFTC rule change sparks dealer-client margin scuffle
FCMs fear “race to the bottom” as funds lobby dealers for lower margin status
Banks fear Fed crackdown on AI models
Dealers say agencies’ request for info could prompt new rules that stifle model innovation
China netting law drives interest in CSAs
Steady growth in contracts with CSAs suggests confidence that clean netting is near
CME, FICC to overhaul Treasury market margining
Clearers eye deal to dramatically improve cross-margin savings, aim to extend offsets to end-users
People moves: BoE’s Roth moves to crypto, UBS bolsters US execution hub, and more
Latest job changes across the industry
Deep XVAs and the promise of super-fast pricing
Intelligent robots can value complex derivatives in minutes rather than hours
Page 19901: the benchmark that time forgot
CFTC probe into swap price rigging revives the ghosts of Libor manipulation
Sunil Cutinho on CME’s crisis performance
Maverick clearing house boss dismisses the need for anti-procyclicality tools imposed by regulators
Could global regulators miss another Archegos whale?
Spotting systemic risk from OTC swaps requires cross-border access to derivatives data
Confusion reigns as US prepares for Libor’s end
Mixed messages from US regulators make it more difficult to plan for life after Libor
Pick a rate: pitfalls and prizes in the post-Libor world
SOFR set to win big in replacing Libor, but trillions could scatter across alternatives
The Libor replacement stakes: runners and riders
Credit-sensitive rates Ameribor and BSBY nose ahead of Ice, Markit and AXI; regulators keep watchful eye
Euronext’s tech migration sprint alarms electronic traders
Co-location users sound warning on plan to chop two years off data centre move from UK to Italy
Hedging valuation adjustment gets cold shoulder from banks
Dealers back the idea of charging for hedging costs but not as part of a new XVA
Quantum trading and the search for the perfect clock
Government push to overhaul satellite technology could improve time-stamping accuracy for trading firms – and for regulators
Zurich’s Scott: don’t levy climate risk capital charges
Imposing set-asides based on stress tests “does not make any sense”, sustainability chief warns watchdogs
The race to offload the world’s biggest pool of assets
Specialist insurers on both sides of the Atlantic expect a bumper post-Covid second half of 2021
How algos are helping inflation-wary investors
Buy-siders look to machine learning for clues on the effect of rising prices on portfolios
Green figures: EU funds search for sustainable taxonomy data
Fund managers must report compliance with taxonomy before many investee companies
Not so green machine? Questioning commodities’ credentials
As ESG investors eye commodities, issues around measurement and management are unearthed
Shades of green: sustainability guidance may not help EU funds
Talk of high SFDR hurdle for ESG funds stokes fears “sustainable” label will be unobtainable
Hedge funds and the rebound in collateral velocity
Reuse rate of collateral points to growing fragility and interconnectedness in financial markets
G-Sib regime: something’s broken
US banks are taking the Fed for a ride – it’s time to address the issue
NSCC caught $600m short during meme-stock frenzy
Worst-case losses would have wiped out the CCP’s available liquid resources on one day in Q1
Fed stress tests stretch Goldman Sachs, HSBC
US dealers toe binding minimums in latest DFAST exercise
JP Morgan, BofA face higher G-Sib surcharges
Both banks could face an extra 50 basis points of capital add-on without remedial action
JSCC issued $2.8bn VM call on a clearing member in Q1
The call was for a participant in the CCP’s clearing services that cover IRS, CDS and exchange-traded financial products
NSCC hit by $1.06bn margin breach
In total, the DTCC division reported 96 margin breaches at end-March 2021
The case for reinforcement learning in quant finance
The technology behind Google’s AlphaGo has been strangely overlooked by quants
Goal-based wealth management with reinforcement learning
A combination of machine learning techniques provides multi-period portfolio optimisation
An approximate solution for options market-making
An algorithm for the market-making of options on different underlyings is proposed
A Darwinian theory of model risk
An ex ante methodology is proposed to analyse the model risk pattern for a broad class of structures
Mizuho EU CRO reveals his top risks – they may surprise you
Fears over technology dominate Wolfgang Koehler’s list of greatest risks for Mizuho’s EU unit
