Risk magazine - Mar 2024
Front cover:
Robert Bennett, Untitled, 60cm x 60cm, Acrylic on canvas
Contact: rjbarts88@gmail.com
Articles in this issue
Choppy inflation may be the worst inflation
Investors can build strategies to suit fast-rising prices, or slow-rising prices. What trips them up is the inflation foxtrot: slow, slow, quick, quick, slow
Reluctantly, CME moves to clear US Treasuries
CME Group will seek regulatory approval to clear US Treasuries, chief executive Terry Duffy said today
EC’s McGuinness: active accounts rule ‘light’ on largest firms
Active clearing account requirement not as ambitious as she hoped, says commissioner
Fed unveils hyper-Archegos test to reveal bank blow-up risks
CCAR for 2024 includes analysis of simultaneous defaults of five largest hedge fund clients
No Canadian banks using internal models as FRTB kicks in
One bank still plans to adopt IMA after delays prevented it going live in January
Europe’s new AI Act threatens supervisory ‘chaos’ for banks
Policy-maker says new role for European Commission could collide with ECB model risk regulation
Bond funds made losing derivatives bets as rates climbed
Some managers’ use of interest rate derivatives looks like ill-timed speculation, study finds
People: Risk shake-up at Santander, JPM juggles markets, and more
Latest job changes across the industry
Adapting buy-side risk management strategies for complex market dynamics
Luke Armstrong from S&P Global Market Intelligence, Thomas Sheedy from Invesco and Julien Cuisinier from Artemis Fund Management explore the challenges and adaptive strategies shaping the evolving field of buy-side risk management
Clobbered: how ‘toxic’ flows reshaped US Treasury trading
Volumes have dropped by more than a third at BrokerTec. The reasons are complex, the outlook uncertain
Basel’s cherry-picking toughens IRRBB shock scenarios
European banks want higher outlier thresholds to offset higher confidence level in new standard
BoE puts American spin on fix for FRTB’s govvies dilemma
Four jurisdictions find four different ways to resolve Basel market risk capital quirk
Why Canada is giving FRTB internal models the cold shoulder
“Crazy” cost of tech upgrades among reasons why banks snub own models to calculate market risk capital
Can risk parity ride out the storm of correlated asset chaos?
High interest rates, spiking inflation and correlation breakdowns are testing risk parity strategies
Beating the drum on cyber risk: the battle for boardroom attention
Delays patching financial sector vulnerabilities highlight the need for more internal clout for cyber chiefs
Why cyber hack leaves EquiLend down but not out
Users turned to alternative securities lending platforms, but that may not mean lost market share
European regulators turn up the heat on IFRS 9 model overlays
After warnings from EBA and BoE, risk managers urge ‘soul-searching’ on post-model adjustments
Tall order: why a unified op risk taxonomy is still elusive
Banks vary in how they classify operational risk losses – and regulators are in no rush to change the status quo
Hedge funds push for transparency in credit determinations
Proposals include more disclosure around meetings and detailed rulings of credit events
Why Canada may need to revisit term Corra methodology
Break from US guidance benefits dealers but some futures inputs underpinning term rate are in short supply
A change of TIIE: the knotty issue of Mexico’s benchmark switch
Outlier fallback methods and narrow window to build F-TIIE derivatives liquidity make for ambitious transition plan
Dealers inch closer to clearing of FX forwards
LCH’s ForexClear aims to ease capital charges and margin constraints on banks, but will it kick-start clearing?
US dealers slam capital hit on clearing for unreal CVA risk
Fed would diverge from Basel standards by imposing CVA capital on client-cleared trades
Mastering XVA dynamics from the buy side
Amid fluctuating prices and macroeconomic uncertainty, buy-side firms are taking a more proactive role in challenging the derivatives valuations of their sell-side counterparties
Digging deeper into deep hedging
Dynamic techniques and GenAI simulated data can push the limits of deep hedging even further, as derivatives guru John Hull and colleagues explain
Zero margin is the real risk in zero-day options
Risk management practices built for slower markets are dangerously outdated
In a world of uncleared margin rules, Isda Simm adapts and evolves
A look back at progress and challenges one year on from UMR and Phase 6 implementation
Comerica takes $91m hit on BSBY discontinuation
Bank forced to re-designate $7bn of receive-fixed swaps as SOFR-referencing hedges
Interbank lending plummets at major European banks
Reduced repo operations and TLTRO repayments among drivers
At some US regionals, CRE loans eclipse tangible equity by up to 7x
Valley National, NYCB and First Foundation the most levered in a sample of 30 banks
TLTRO hedge unwinding bill tops €1.2bn at BNPP, SocGen
Exit from swaps tripped up by ECB’s tightening marred banks’ 2023 throughout
IM requirements for interest rate swaps up $30bn in December
Latest figures from CME, Eurex and LCH show a trend reversal from previous six months
A dynamic margin model takes shape
New paper shows how creditworthiness and concentrations can be reflected into margin requirements
SABR convexity adjustment for an arithmetic average RFR swap
A model-independent convexity adjustment for interest rate swaps is introduced
Dynamic margining long/short equity trading strategies
A repo haircut model extends a previous solution for long-only strategies
