Risk magazine - May 2025
Cover detail:
Michael Falzoni, Theatre
Watercolour and ink on paper, 15 x 30 cm
www.michaelfalzoni.com
Instagram: @michaelfalzoniart
Articles in this issue
Hedge funds burned as Hong Kong dollar bets implode
Carry trades and call spreads unwound after Trump tariffs pushed spot to edge of currency peg
European investors ramp up FX hedging as ‘dollar smile’ fades
Analysts at one bank expect average hedge ratios to jump from 39% to 70% within six months
Citadel exec questions regulatory findings on repo haircuts
Isda AGM: OFR analysis didn’t account for excess collateral held against cleared positions in related trades
US has got what it wanted from Basel, say former regulators
Calls to stay at the table come after US Treasury Secretary condemned “outsourcing” of regulation
Academics call for tenfold jump in CCP capital cover
New framework finds mono-layer clearing houses may require biggest skin-in-the-game
EU banks want the cloud closer to home amid tariff wars
Fears over US executive orders prompt new approaches to critical third-party risk management
CLO market shakes off ETF outflows
Despite record redemptions, exchange mechanics and relatively small volumes cushioned impact
People: CFTC in exit spree, new NatWest Markets CRO, and more
Latest job changes across the industry
Repo on Execute: unlocking liquidity with innovations in market structure
Execute is driving the digital transformation of the repo market, creating a new standard for the industry
Mr Bessent goes to Basel: the fate of global bank regulation
US resistance to international standards could spark greater fragmentation of prudential rules
What drove the Taiwan dollar surge?
Foreign speculators, carry unwinds and central bank inaction fuelled the 10% move, not just life insurers, say traders
US Basel equivalence questioned as EU patience wears thin
MEPs say unfaithful US implementation of Basel III could trigger review of third-country capital treatment
Back-to-back hedging is back on the table for autocall issuers
Deal activity is picking up as prop shops compete with hedge funds for structured products risk
Leverage ratio reform: the good, the bad and the Treasury
A simple cut would be less likely to stoke interest rate risk than exempting US government bonds
Why Basel’s push to overhaul PFE is a wake-up call for risk teams
The regulatory push, lessons from Archegos and why a unified PFE/XVA framework is becoming the new standard
Why US banks are not taking their eye off reputational risk
The concept may be removed from supervisory exams, but the 2023 crisis showed the risk is real
Op Risk Benchmarking 2025: the FMIs
Exchanges and CCPs respond to regulatory scrutiny and evolving threats with tighter vendor management and scenario refreshes
Risk managers brace for night shifts as 24-hour trading looms
Questions swirl around how margin breaches and defaults will be handled during overnight hours
Disclosed trading an oasis in the FX liquidity ‘mirage’
LPs say growth of relationship-based trading bolstered market during April volatility
Wait in the Q: US banks hold back on tariff-related provisions
Lack of data on supply chain vulnerabilities creates challenges for early CECL adjustments
Rising systemic risk demands a new risk management paradigm
Reinsurers need insurance-linked securities to share burden of climate-related catastrophic risk
Volatility and geopolitical risk fuel new approaches to energy trading and risk management
Energy market participants seek new tools and signals to navigate near-term volatility and long-term uncertainty
JP Morgan’s VAR limits blown twice during haywire Q1
Breaches add to the two regulatory backtesting exceptions sustained the previous quarter
BNP Paribas’s CVA risk charges swell 56% on Basel III overhaul
Impact of new formulas is largest yet for a G-Sib
Basel III switch sends BNP Paribas’s op risk charges up 60%
Blow-up follows shelving of AMA model previously underpinning over two-thirds of op RWAs
UBS hit with $761m capital add-on for uncollateralised hedge fund lending
Finma imposes Pillar 2 buffer over Archegos-style exposures
JP Morgan’s equity VAR hit GFC levels in March
Bank blames now-matured client position for temporary risk surge
Investors find smoother path with smart beta
In the face of evolving volatility, investors are demanding a smarter approach to strategic asset allocation
A mix of Gaussian distributions can beat GenAI at its own game
Synthetic data is seen as the preserve of AI models. A new paper shows old methods still have legs
Gaussian GenAI: synthetic market data generation
A method to generate financial time series with mixture models is presented
Option market-making and vol arbitrage
The agent’s view is factored in to a realised-vs-implied vol model
Podcast: Fabrizio Anfuso on computing for Archegos-like event exposures
BoE quant discusses top-down counterparty risk framework using Gaussian distributions and copulae
Fixed income finesse: striking a balance amid shifting rates
An increasingly unpredictable economic environment leads investors to look for a wider range of products to satisfy evolving strategies
