Risk magazine - Mar 2021
Articles in this issue
NSFR may clear up questions about Nomura’s balance sheet
The risks of off-balance sheet financing remain largely hidden from view
SOFR adoption stalls after US Libor delay
Stay of execution, RFR illiquidity and fallback reliance slow SOFR adoption
Swaps users shun cash compensation in LCH Libor switch
Members push for spread adjustment to maintain risk profiles, ignoring warnings of market bifurcation
Callable repack frenzy opens up new options market in Europe
Demand driven mainly by French life insurers looking for alternatives to low-yielding sovereign bonds
Vix vulnerable to retail short squeeze, analysts warn
Volatility products could see more wild swings as dearth of vol sellers exacerbates spikes
Ending leverage ratio relief could force US banks to downsize
Biggest lenders may have to limit repo activity to manage leverage capital, observers say
EU targets late 2024 for FRTB internal model reporting
Final IMA rules to be adopted in mid-2021 with three-year implementation period
People moves: Goldman loses three to fintech start-up, departures at Bank of America, and more
Latest job changes across the industry
What lies beneath: Nomura’s iceberg balance sheet
Collateral received by the Japanese bank exceeds its total on-balance-sheet assets – does it matter?
Quants pitch strategies for when bonds no longer work
Investors are flocking to alternative diversifiers of equity risk
The importance of getting technology change right
Christoph Kurth, partner and member of the global financial institutions leadership team at Baker McKenzie, covers some of the rapid technological changes under way brought about by, and in the wake of, the Covid-19 pandemic
Softer US NSFR could skew global repo pricing
US banks benefit from Treasury repo exemption, while EU banks report only end-quarter ratios
Op risk managers could be Covid long-haulers
New threats sprang from old sources in this year’s Top 10 op risks, belying a big drop in losses
Top 10 operational risks for 2021
The biggest op risks for the year ahead, as chosen by senior industry practitioners
Heightened operational risks in a changing world
Christoph Kurth, partner and member of the global financial institutions leadership team at Baker McKenzie, discusses the growth of conduct and operational risks in the light of the pandemic, including those caused by mass home-working, the enhanced…
Covid-19 prompts buy-side rethink on stress tests and risk integration
FactSet explores why asset managers and owners are deploying novel bank-quality modelling and alternative datasets as they take aim at risk-informed portfolio management
All roads lead to Bergamo: Euronext eyes new home for its tech
Market participants fear a “horrible” relocation project and more room for latency arbitrage
Funds rush to take the temperature of their portfolios
Big investors, including BlackRock, are using new metrics to measure their funds’ carbon emissions
UK Treasury opens door to ditching Mifid open access rules
Champion of competition in derivatives clearing may throw in the towel
Nordea CRO – a ‘controls freak’ meets Covid
Flexible checks and balances at bank's asset management arm kept risks within tolerance
European funds fret over merits and risks of ethical labels
Managers unsure whether to “aspire to” or “run away” from new ESG classifications for funds
Optimisation firms prep for SA-CCR boom
Flush with new cash, vendors ready rebalancing services ahead of risk-sensitive leverage framework
Banks boot up next-gen FX hedging bots
Automated FX hedging can save money and time, proponents argue. But corporates have qualms
As machines disrupt investing, people still have a role to play
Despite AI’s growth, investing still needs human adaptability and judgement, writes Schroders’ Lim
Too much of a good thing? Banks mull over excess deposits
Surge in non-operating deposits leaves banks with a severe hangover
Top US banks saw liquid assets grow over $500bn in 2020
JP Morgan saw HQLAs increase 28% year on year
EU banks expect OTC trading conditions to tighten
Credit conditions had eased in Q3 and Q4 2020, but were expected to get tougher in Q1
Non-US banks cut back on MMF dollar funding post-Covid – BIS
Non-bank dollar deposits offered alternative supply of greenbacks
XVAs ate $401m of JP Morgan’s revenues in 2020
Credit valuation adjustment on derivatives cost $337 million alone
SOFR swaps traded volume hit new high in January
Notional volumes surpass $222 billion
Model reviews imposed capital charges on top EU banks in Q4
Societe Generale incurred a -36bp hit to its CET1 ratio due to Trim
Put options power up variable annuities
Insurance quants increase risk-adjusted profits using novel hedging technique
Impact of hedging strategies on variable annuities
Put options may reduce the cost of hedging strategies for insurers
SABR smiles for RFR caplets
The SABR model for volatility is adapted to price risk-free rate caplets
Credit migration: generating generators
A stochastic time change helps the modelling of rating transition
Ex-SunGard chief Cris Conde’s random walk to fintech and beyond
Technologist talks artificial intelligence, angel investing and accidentally contributing to the Basel framework
