Risk magazine - June 2021
Articles in this issue
Fake data can help backtesters, up to a point
Synthetic data made with machine learning will struggle to capture the caprice of financial markets
CME wins term SOFR race
Fed-backed working group puts term rate back on track, but low volumes keep endorsement on hold
Prudential, Goldman cast doubt on Libor-like replacement rates
Isda AGM: Participants split on case for credit-sensitive rates in post-Libor world
CDS market prepares to join Libor transition
Ice and LCH will switch to new rates for margin interest; Isda to follow in standard model update
Citi turns to decrement indexes for single-stock autocalls
US bank claims new Stoxx indexes for 23 single names will slash hedging costs and boost coupons
Nomura hires McKinsey to examine Archegos failings
Risk framework under external review as DOJ reportedly opens probe into fund’s collapse
Could an Archegos blindside banks in Europe? Not really
Archegos’ banks were burnt by its hidden US swaps – in much of Europe, they would have to be public
People moves: five leave JP Morgan, MS names co-presidents, and more
Latest job changes across the industry
In fake data, quants see a fix for backtesting
Traditionally quants have learnt to pick data apart. Soon they might spend more time making it up
Yen swaps users stuck in clearing Catch-22
Lack of access to client clearing at JSCC poses problems for US buyers of Japanese government bonds
Changing derivatives strategies to address the new normal
The events of 2020 have propelled liquidity and collateral management to the top of the priority list for many buy-side organisations. A recent survey by Risk.net and Eurex explores how derivatives strategies are changing in response
From one extreme to another: Covid upsets loan models once more
Unusual economic slumps tripped up models in 2020. Now, they are struggling with fast recoveries
BlackRock faces an early climate change test in China
The firm is the main Western investor in three of the worst emitters. It has yet to change their ways
Who’s afraid of the RPI-CPIH judicial review?
RPI trading booming as market ignores legal challenge to the transition
Tectonic shift: could RPI transition be the new Libor?
With CPIH set to replace RPI in 2030, some say the move could cost pension funds around £90bn
Hedges are in short supply as inflation quickens
UK pension funds want to hedge against rising prices, but the government is not issuing enough bonds
Trouble in the family: regulators’ options after Archegos
What rule changes are needed in response to the messy collapse of Bill Hwang’s firm?
EU funds shudder at Mifid transaction reporting plan
Repeated Esma recommendations would increase costs of single portfolio management services
A bold step forward in climate-related financial risk supervision
Banque de France’s Denis Beau explains the results of a pilot exercise, and what comes next
Is short vol taking the long count?
Short volatility players try to box clever after strategy’s Covid rout
Quant grad conveyor belt stalls as banks retrench
Jobs market is long quant graduates, short vacancies – but hiring freeze shows signs of thawing
If dogecoin goes to the moon, a risk manager should go too
There seems little logic to the price of meme assets – but bold investors can protect themselves, says tech expert
Clock auctions: a stitch in time for Libor?
MIT professor says Nobel-inspired mechanism could cut basis risk and ease $74trn Libor shift
Quant fund aims to tame bitcoin, and 39 other digital assets
Ex-Morgan Stanley, Winton vets reimagine institutional risk management for volatile crypto markets
Time for BoE to rethink the leverage ratio
The disparity of treatment keeps UK banks on an unlevel playing field
US banks add $130bn in carve-out assets as SLR relief ends
JP Morgan led the top US banks in increasing their stock of US Treasuries and excess reserves
JPM records highest number of profit-making days in six years
In aggregate, US G-Sibs racked up 355 profit-making days over Q1
Morgan Stanley, Bank of America push VAR limits the most
Largest losses-to-VAR ratios at the two firms were the highest among the eight systemic US banks in Q1
Commerzbank’s op RWAs hit 10-year low
The bank added 20bp to its CET1 capital ratio in Q1
ABN Amro’s market risk charge grew 54% over Q1
Dutch bank hit with higher VAR and SVAR multipliers
Citi edges towards Collins floor
The gap between standardised and advanced RWAs has shrunk significantly during Q1
Synthetic data enters its Cubist phase
Quants are using the theory of rough paths to distil the essence of financial datasets
Generating financial markets with signatures
Signatures can provide the synthetic data to train deep hedging strategies
The arcsine law for quantile derivatives
A new pricing model for quantile-based derivatives, such as Napoleon options, is presented
The step stochastic volatility model
Extreme short-dated skew can be obtained by decomposing it in two parts
Quantum kit offers HFTs ‘100-fold’ speed boost
After spotting FX arbitrage opportunities, new tech faces real-world test in Japanese stocks
