Risk magazine - Oct 2019
In this month’s issue: It could be the end for gaming in stress tests; pre-Brexit premium hikes for deal contingent swaps; a lack of clarity in CFTC exemptions; and much more
Articles in this issue
In stress-test window-dressing, timing is everything
EBA and Fed stress tests would have to be in perfect sync to stamp out transatlantic arbitrage
Isda sets two options for Libor fallback spread
Historical spread adjustment to be based on five-year median or 10-year mean
Floating start date for 2020 stress test alarms EU banks
Regulator proposal could lead to less reliable market risk data, critics warn
Mirror-image factors are wiping out quant alpha
Equity momentum and value strategies are cancelling each other out, buy-siders say
EU seeks to offer reassurance on Brexit clearing exemption
Commission can act quickly to stave off no-deal market disruption, insists official
€STR swap trading gets under way
HSBC and JP Morgan strike first swap linked to the new euro short-term rate
Eurex to launch cross-currency swap clearing ‘within weeks’
Clearing service will target dealer-to-dealer trades before later rolling out to clients
Ice, CME shore up clearing house recovery planning
Introduction of VMGH and tear-ups comes amid impasse over CCP recovery and resolution rules
Deutsche opens bidding for interest rate derivatives
Fixed income assets on the block after equity derivatives sale closes
People moves: ING fills two top roles, RBS confirms Rose as CEO, and more
Latest job changes across the industry
ESG investing: It’s not just great to be good
Investing according to environmental, social and governance (ESG) criteria can be done in various ways, with continuing development of filters and ways of analysing companies. As the market in ESG indexes and investments linked to sustainability matures,…
How banks game stress tests: the ‘shocking’ truth
Leaked memo exposes effort to swap out risky assets despite Fed’s push to end “window dressing”
IFRS 9 flings loan-loss provisions haphazardly higher
Under the standard, cash piles for bad loans were expected to ramble. Just not quite so much
Deal misfires expose risk of contingent hedging
Banks hike premiums on deal contingent swaps amid Brexit uncertainty
In JP Morgan’s JV buy, some see snares of China
The US firm paid a ‘ransom’ for JV control. Others mull what that means for their own China strategy
US clearing houses need not take collateral damage from Brexit
There are signs the US and EU will pull back from the brink in dispute over CCPs
CFTC’s equivalence plan divides clearing houses and clients
US end-users prefer alternative compliance, but foreign CCPs want exempt status
On CCP oversight, US and EU may be closer than they appear
Competing proposals on foreign CCP oversight have more in common than recent rhetoric implies
How bad is bad? A look at 30 small banks in China
An anxious China has rescued three banks this year. At least 25 more share some of their worst traits
Fund fears linger over guidelines set to avert fire sales
Final Esma framework allays some European asset managers’ concerns
Ice swap rate failure disrupts exotics desks
Dollar version of rate wasn’t published on nine out of 22 working days in August
How collateral scarcity reshaped the US yield curve
QE and demand for high-quality liquid assets have suppressed short-term rates, argue IMF economists
Watchdogs ask EC to delay repo haircut floors. Will it?
EBA says hedge funds will skirt the rules, but Basel and FSB want haircut minimums in place
European FRTB proposals spark XVA overload fears
Banks warn of overly complex revaluation process and heightened risk of backtest fails
Libor takes a back seat as insurers await regulatory clarity
Eiopa silence on discount curves holds back transition plans
Some quant shops doomed to ‘struggle’ – López de Prado
Theory-first firms must modernise their methods or wither, says machine learning expert
When climate risk starts to bite
Energy firms under increased pressure to assess physical climate risk
Interdealer broker rankings 2019: the story behind the votes
Volumes in decline, while start-ups pose increasing threat
SOFR futures volumes surge as overnight repo rates spike
Daily trading volume of one-month contracts climbs 156% between September 16-17
European banks set for 18.6% capital hike under Basel III
Model output floor and higher credit and op risk charges will drive most of the increase
Equity derivatives surge at US G-Sibs
Gross notionals have increased 8.9% year-on-year
Among G-Sibs, Japanese and US banks see LCRs improve most
US systemic banks’ liquidity coverage still lags behind other G-Sibs
JP Morgan’s CVA charge jumps $249m in Q2
All US G-Sibs post higher CVA capital requirements for the quarter
EU high-yield funds at risk of liquidity shock – Esma
High-yield bond funds have just 13% of NAV in high-quality liquid assets on average
Op risk data: Sanctions-busting fines cost banks $20bn
Also: ABN pays out for risk profiling fail; Deutsche settles nepotism charges. Data by ORX News
Credit data: sustainable companies are better credit risks
When credit conditions deteriorate, companies with high ESG scores outperform
Swaps data: are the new RFRs on track to replace Libor?
Progress on volumes of SOFR and Sonia swaps and futures
Game theory plays well for capital management
Barclays quants use Shapley method to optimise capital allocation
Reduced-form capital optimisation
A linear approximation to an allocation technique provides a solution for banks’ capital managment
Forecasting value-at-risk
Alvin Stroyny and Tim Wilding build a dynamic risk framework for multi-asset global portfolios
Volume-starved SOFR leaves quant hankering for data
At T. Rowe Price, a top quant is tired of SOFR being “yanked around by the liquidity premium”
