Risk magazine - Jun 2023
In this month’s issue: no quick fix for term SOFR swaps, an IRRBB riddle, the quant master’s guide, and much more.
Cover detail:
Robert Bennett, Untitled, Acrylic on canvas
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Articles in this issue
In bank runs and market crashes, it matters how ideas ‘catch’
Contagion episodes show importance of network effects in finance
CCPs mull collateral options amid debt ceiling deadlock
Isda AGM: Raising haircuts and minimum maturities are among measures on the table to avoid a cliff-edge
Regional banks face soaring term SOFR spreads
Bid/offers hit 10bp as dealers price counterparty risk into non-cleared Libor transition trades
Basel climate guidance leaves op risk managers in the dark
Banks still unclear on how to fit climate events into existing capital framework
Eurex scrambles to avert Treasury collateral ban on US default
Current policy prevents CCP from selectively excluding eligible collateral
Banks dispute EBA’s new threshold for IRRBB test
Banks say new proposal for identifying outliers on net interest income is still too severe
Easing of trading curbs is no quick fix for term SOFR swaps
ARRC’s new guidelines will do little to improve liquidity, but may keep a lid on spiralling basis
Europe’s new IRRBB test: the riddle with no answer
A proposed compromise on net interest income test is not scientific, but exact calibration may be impossible
EU banks fear Brexit battle over FRTB internal models
Bank of England approach looks easier, but that may not make much difference to model uptake
FRA-OIS demise leaves hole in bank treasury risk management
Banks now face ‘greater downside’ to widening credit spreads
Why NDF execution algos might still hit the spot
Products have yet to live up to initial hype, but their long-term potential for investors remains significant
Quant Finance Master’s Guide 2023
Risk.net’s guide to the world’s leading quant master’s programmes, with the top 25 schools ranked
Taking stock: putting a price on US bank regulation post-SVB
Tougher requirements could “blow a hole” of 200+bp in regulatory capital ratios – and cripple equity returns
After SVB downfall, EBA stress test seeks out unrealised losses
European regulator asks for data on the fair value and sensitivity of bonds and their hedges
SVB failure signals Fed’s need for a speed rethink
Rapid transition to large-bank bracket left supervisors flat footed on rate risk
Risk modellers navigate fearful new world of depositor behaviour
Silicon Valley Bank suffered fastest bank run in history, but how should others respond?
Investor wish-list offers no quick fix for Swiss CoCos
Some want bond doc overhaul to clarify bail-in risk, but sovereigns can always change the rules
Dutch pension funds brace for hedging revamp
Planned legislative changes set to reduce long-end hedging needs, but market divided on curve impact
ERM reboot: how insurers are turning risk decisioning into strategic advantage
Enterprise risk management is a powerful strategy to identify, assess and manage risks across the business. For insurers, two ERM objectives are critical: ensuring regulatory compliance and establishing a framework for healthy investment risk appetite
Liquidity risk hits record high at CME
Heightened market volatility in Q1 pushes F&O’s worst-case payment obligation up 13%
US arms of Credit Suisse, SMBC stumble on VAR
Breaches of trading forecasts in Q1 result in higher value-at-risk multipliers for the duo
US banks load up on time deposits amid liquidity concerns
Charles Schwab leads charge with fourfold increase
MUFG’s settlement risk surges fourteenfold
Risk-weighted assets for Japanese lender’s unsettled transactions cross ¥300 billion mark in the first three months of 2023
Citi’s CVA charge up 7% in Q1
Bank retains the highest capital requirements of any US dealer, ahead of JP Morgan and Bank of America
Podcast: Jan Rosenzweig on fat tails and LDI portfolios
An optimised portfolio can look very different when extreme moves are given more weight
Fat tails and optimal LDI portfolios
A portfolio optimisation technique for pension funds and insurance portfolios is presented
Information geometry of risks and returns
An innovative product design framework and its geometric interpretation is introduced
The regulator that troubleshoots first, asks questions later
Canada’s bank watchdog aims to intervene early to tackle burgeoning risks, even at the expense of “perfect” regulatory decisions