Risk magazine - Jun 2019
In this issue: the perils of placing regulators at the controls; how seven banks are tackling the Libor transition; the FXPB powder keg; US regional banks; and much mor
Articles in this issue
Can European banks crack the capital allocation code?
Banks “stuck on the same feedback loop” due to sheer weight of capital rules
JP Morgan turns to machine learning for options hedging
New models sidestep Black-Scholes and could slash hedging costs for some derivatives by up to 80%
Talk of delaying IM ‘big bang’ sparks backlash
EC official's recent comments may hamper compliance preparations, dealers say
Swaps users mull ‘big bang’ for SOFR discounting
Cleared and bilateral US dollar swaps could move to SOFR discounting on the same day in 2020
Fed pushes big banks to calculate CVA for CCPs
Banks including JP Morgan and Credit Suisse told to quantify exposure to CCPs for annual stress tests
Volatility scaling unravels as market patterns shift
Waning power of quant approach could be a reason for trend following’s malaise
Final FRTB tweak ‘will kill correlation trading’, say dealers
Some European banks plan to lobby ECB for relief when rules are transposed to local law
People moves: new role for SG CIB’s Cartier, LCH rates head departs, BNP Paribas’s Akbay joins Goldman, and more
Latest job changes across the industry
New applications in Asia’s financial crime analytics
Financial crime is a fast-growing problem for Asia‑Pacific financial services firms. Working with outmoded systems and patched-up processes to detect, monitor and eliminate potential threats, banks are spending millions on sophisticated new solutions to…
How capital rules overwhelmed bank strategy
Regulators shouldn’t run a bank – but Basel III and stress tests have put them in the cockpit
A powder keg in forex: the prime broker business
Brokerages look at high-speed algo trading paired with bloated credit limits – and shudder
US mid-sized banks may bulk up. (Is that safe?)
The crisis over a decade gone, the Fed’s ‘tailoring’ proposal will greatly relax rules on the mid-tier
Libor leaders: how seven firms are tackling the transition
BMO, Prudential, Associated British Ports, LCH and others reveal their plans to move off troubled benchmark
Not random, and not a forest: black-box ML turns white
Bayesian analysis can replace forest with a single, powerful tree, writes UBS’s Giuseppe Nuti
Financial firms toil to meet new EU rules on outsourcing
Negotiating right to audit vendors, including cloud providers, seen as toughest requirement
Operational resilience means learning from failure
Firms and regulators could share data on mistakes, says Garp’s Jo Paisley
Outsourcers eye bigger role in funds’ fixed income trading
Research suggests 20% of large asset managers will outsource part of overall trading by 2022
Sonia advances: liquidity builds as banks eye interdealer shift
Libor’s successor has some solid footholds. Wider acceptance could come as soon as later this year
Fund-linked structured products face extinction under FRTB
Global market risk capital standards carry sky-high charges for fund derivatives
How does it look from space? Satellite surge to alter investing
Higher-frequency images set for use in entirely new ways and by more investors than before
Fund houses get picky over where to use machine learning
Buy-siders limit usage of deep learning techniques due to haziness over their inner workings
Neuberger trusts market-timing model to hook China investors
Fund aims to smooth returns for buy-siders spooked by past market dips
Analytics become top priority at energy firms, poll finds
Middle office still grappling with use of blockchain and artificial intelligence
Getting risk models runway ready
Banks struggling with internal model requirements may soon opt for off-the-rack rather than bespoke
US G-Sibs keep on expanding repo books
JP Morgan has increased repo exposure by 34% year-on-year
Eurozone insurers’ bets on alternatives raises systemic risk
Dutch firms have more than 25% of total assets tied up in non-traditional investments
EU’s model study finds problems with bank VAR methods
Banks surveyed by the ECB had an average of 32 issues with their market risk models
Short-term bets push interest rate option volumes higher
Open interest in short-dated contracts surges 23% from December to March
UK public sector offloads swaps
Gross derivatives outstanding with public entities stood at £5.9 billion in Q1
Op risk data: Chinese regulators levy record fines
Also: top losses feature two frauds at Russia banks and AML provisions at Nordea. Data by ORX News
Credit data: more trouble in the oil and gas pipeline
US self-sufficiency in oil could be bad news for shale producers
Swaps data: a new era of competition in interest rate futures
The demise of Libor has set off a battle for market share in futures referencing new risk-free rates
Time to put real problems to the quantum machines
There is a lot to learn before quantum computers can be applied to specific financial problems
Beyond Markowitz with quantum annealing
Venturelli and Kondratyev use quantum annealers to optimise portfolios
Capital allocation under the Fundamental Review of the Trading Book
Quants propose an allocation method for internal model capital charges
The fair basis
Wujiang Lou remodels credit arbitrage by introducing funding and capital costs
RJ O’Brien’s chief risk officer on margin models and clearing
CME’s looming switch to VAR model will have pronounced effect on broker and its clients, says Brad Giemza
