Risk magazine - Mar 2023
In this month’s collection: What deglobalisation means for investors; life after IRB; the top 10 investment risks; and much more.
Cover detail: Samuel Deacon, Abstract Forms #1
Plaster and acrylic paints on canvas, 80cm x 60cm
www.anne-mariebainbridge.co.uk
am.b@btopenworld.com

Articles in this issue
Inflationary forces (and microbial soups)
The hold of central banks over inflation may be weaker than we thought
Ion in the fire: three banks call in lawyers after hack
Banks are examining service-level agreements for possible breaches
Mystery upstarts crash Robinhood’s retail options party
SEC filings hint at wider shake-up in wholesale options market-making
US insurance regulators move to kill CLO arbitrage
Capital charges on collateralised loan obligations will be model-based after 2024
ECB promises ‘proportionate’ approach to interest rate risk
But banks still fear regulatory and investor response if many are classed as outliers
Crypto gets to grips with interest rate swaps
New derivatives provide synthetic access to staking yields and are being used in structured products
Chinese snowball revenues melt away
Securities firms see falling revenues in the index-linked trades, but struggle to replace their profitability
Lawmakers join pushback over SEC dealer rule
Bipartisan letter to Treasury says proposal would damage market liquidity
People: More Goldman sackings, Citi promotes for Emea, and more
Latest job news across the industry
‘Globalisation rewired’: what does it mean for investors?
After half a century of outsourcing production to developing nations, companies are changing tack – with long-term implications for investors
US credit risk modellers prepare for life after IRB
Stress tests and economic capital calculations may not carry the same weight as Basel ratio
Why risk managers don’t trust the EU’s new IRRBB test
And why there may never be a perfect way of assessing the risks of changes in net interest income
Ice Clear Europe collateral spreads a ‘nightmare’, say banks
Risk.net spread analysis shows Ice pays little more than half the rate of other CCPs on cash margin
Risk.net’s top 10 investment risks for 2023
Geopolitical frictions, sticky inflation and a hard landing are among the hazards cited by investors
Benchmarking deep neural networks for low-latency trading and rapid backtesting
Faster, more powerful graphics processing units have the potential to transform algorithmic trading and offer a credible alternative to more expensive devices, explain Nvidia’s technology engineering team
Industry fears burden of SEC’s giant equity market makeover
Even buy-side representatives warn the impact of retail order auctions is unpredictable
Pension funds may sue managers ‘for making hedging a liability’
Finger of blame for LDI crisis is also being pointed at fiduciaries and even the schemes themselves
EU snub to clearing carve-out hurts optimisation efforts
Forcing firms to clear risk-reducing trades would squeeze collateral and potentially hike liquidity risk, dealers warn
P2P platforms look to bring banks into the fold
The USP of peer-to-peer FX matching venues is that they cut out the middleman. So why are they now inviting them in?
EC stuns corporates by scrapping Emir swaps exemption
Industry confused as to why intragroup reporting obligation needs resurrecting
Stablecoins: good as the buck, or breaking the buck?
Collateral concerns and iffy auditing have raised fears of a ‘de-pegging’ event – and possible contagion across crypto and beyond
The impact of rising interest rates on risk models and balance sheet management
In this podcast, ALM and treasury experts discuss how global rate hikes are triggering changes to balance sheet management, behavioural modelling and hedging
Alameda’s mystery bank stake reignites Fed deposit debate
Crypto challenger Custodia accuses regulator of unlevel playing field over master accounts
Options liquidation can be costly. How costly?
New model uses open interest and volume data to calculate the expense of selling an options portfolio during times of stress
CCP ‘skin in the game’ still dwarfed by member contributions
Even as markets churned in 2022, clearing houses coughed up only 2% of funds at end-September – the same as the previous year
Contrarian Goldman grew fair-value bond book in 2022
Held-to-maturity securities balloon, but bank also adds mark-to-market Treasuries as others curtail them
BMO, TD and US Bancorp hit by out-of-the-money goodwill hedges
Derivatives meant to offset dilution of capital in acquisitions turned loss-making as yields temporarily slumped
US banks’ VAR breaches up 2.5x in 2022
‘Hypothetical’ one-day losses exceeded VAR on 55 occasions, as losing trading days prevail
Basel III TLAC shortfall widens to €30bn
Three systemic banks responsible for the increase in latest Basel Committee assessment
Commercial bank cash grows more popular for initial margin
Shift driven by Ice Europe as CCPs diverge on preferred type of collateral
Was Archegos default a one-in-a-million event?
BoE quant says neglecting high leverage and WWR may create conditions for similar blow-ups
CMS pricing: overdue annuities
An RFR-based pricing and risk management model for CMS and its derivatives is presented
Momentum transformer: an interpretable deep learning trading model
An attention-based deep learning model for trading is presented