Risk magazine - Mar 2025
Cover detail:
Duart Bel Silva, From Madeira 10
Acrylics on wood panel, 47 x 55cm / 19 x 20in
www.instagram.com/duartbelsilva/
www.duartbelsilva.art
Articles in this issue
CCP models vulnerable to Trump risk
Volatility of ‘will he, won’t he’ tariff strategy could confound clearing house risk models
Hedge funds flock to US swap spreads on SLR easing talk
‘Trade of the year’ sees investors position for shrinking negative basis as Treasuries predicted to outperform swaps
Gilt repo clearing mandate on Bank of England’s radar
Sources say regulator mulling benefits of US-inspired regime, but is non-committal
Basel tweak may weaken counterparty hedging, industry warns
Proposed technical revision risks dissuading bespoke CDSs and guarantees covering derivatives exposures
Japan’s regulator stands firm behind Basel as peers buckle
Japanese banks fear being at a disadvantage to rivals as Basel III implementation falters
PTFs clash with banks over ‘done-away’ US Treasury clearing
Trading firms losing patience with banks’ reluctance to unbundle trading and execution
SRT markets kick US banks’ caution to the kerb
Market for capital relief trades continues apace despite US banks’ reluctance to offer leverage
QIS 3.0 ‘bonanza’: hedge funds pivot from options to swaps
Pod-level scramble for max-loss exposure gives way to central risk books seeking overlays
Hedge funds flock to hybrids to trade macro uncertainty
Firms repurpose structure made popular by Trump trades last year
Delving into the European Commission’s proposed overhaul of FRTB
Raft of potential changes would benefit both IMA and SA banks – but only temporarily
Tug of law: EC’s FRTB compromise plan can’t please everyone
Leaked draft consultation unlikely to reconcile the global versus regional bank divide
Top 10 operational risks for 2025
The biggest op risks as chosen by senior practitioners – and what they’re doing about them
Credit loss database reveals holes in Basel’s IRB formula
Researcher has used two decades of data to propose improved internal model methodology
Can Europe prepare ground for insurers in securitised products?
Convincing regulators to make investing more viable would be a first step to revitalising insurer interest
A peek under the hood of Canadian banks’ new CVA machine
Disclosures from the country’s top dealers offer first glimpse of how FRTB reforms can reshape capital gauge for potential losses on derivatives
No need for repo clearing ‘cannon’ in Europe, says industry
Observers question rationale for a clearing mandate, calling for clearer incentives
Does FX Spot+ add up for traders?
New CME venue aims to provide easier access to FX futures liquidity, but some worry about its stability in choppy markets
NSCC liquidity shortfalls raise T+1 concerns
Lagging FX settlement processes could become a problem for clearing houses
Can Bessent lower 10-year yields? Investors have their doubts
Unconventional tools won’t sway bond markets, say buy-siders, with yields as likely to go higher as lower
Shaking things up: geopolitics and the euro credit risk measure
Gravitational model offers novel way of assessing national and regional risks in new world order
Why the survival of internal models is vital for financial stability
Risk quants say stampede to standardised approaches heightens herding and systemic risks
BofA, JPM face 50bp increase in G-Sib surcharge
Surge in systemic indicators puts banks on track for 3.5% and 5% add-ons in 2027
Citi sees sevenfold spike in derivs exposure cash outflows amid data upgrade
FX data enhancement triggers record-breaking projected cashflows, but net position remains largely unchanged
SLR relief for Treasuries would lift median banks’ ratio by 57bp
Charles Schwab and Goldman Sachs set for biggest boost if Covid-era relief returns
US dealers tally most VAR breaches since mid-2023
Market turmoil in Q4 blindsides models at systemic and regional banks alike
NSCC suffers record $7bn liquidity shortfall
Index rebalancing in December drives CCP’s largest-ever simulated funding gap
Auto-encoding term-structure models
An arbitrage-free low-dimensionality interest rate model is presented
Estimating mean reversions in interest rate models
The speed of factors’ mean reversion in rate models is estimated
Podcast: adventures in autoencoding
Trio of senior quants explain how autoencoders can reduce dimensionality in yield curves
Podcast: Lyudmil Zyapkov on the relativity of volatility
BofA quant’s new volatility model combines gamma processes and fractional Brownian motion
