Risk magazine - Sep 2019
In this month’s issue: A hard look at software costs; butterfly trades savaged; the mechanics of CME’s Span 2; and much more
Articles in this issue
When regulators become nationalists
EU’s new treatment of bank software assets is partly a response to global competitive pressures
Dealers rush to redeem high-yielding structured notes
An estimated $60 billion of structured notes are at risk of being called before year-end
Goldman improves execution ‘by 50%’ with new algos
Bank uses neural networks and other AI tools to cut slippage in stock trading
CME-LCH basis collapses amid rates downturn
Brexit and recent LCH initial margin raise could also be factors
New op risk taxonomy set for October debut
Project is being closely watched by banks and regulators amid frustrations with legacy Basel approach
Esma probes blurry line between FX vendors and venues
Forex liquidity aggregators resemble trading platforms – but are not regulated as such, critics charge
Dealers dip toe into Sonia swaptions market
NatWest and HSBC print trades, Barclays offers prices
Splits emerge over ‘pre-cessation’ fallback triggers
CCPs say cleared swaps will move to new rates if Libor is no longer representative of markets
People moves: Deutsche hires new treasury unit head; markets role for Barclays’ Pecot; Penney leaves HSBC, and more
Latest job changes across the industry
Structured products – The ART of risk transfer
Exploring the risk thrown up by autocallables has created a new family of structured products, offering diversification to investors while allowing their manufacturers room to extend their portfolios, writes Manvir Nijhar, co-head of equities and equity…
Europe’s regulators grope for value of software
In the US, the cost of software is not taken out of capital. Europe is fumbling for something similar
Euribor futures spread spike strangles prop traders
Safe-haven butterfly trades savaged by shock divergence in mid-term contracts
Span 2: a fine balance
Switching margin model means walking a tightrope of competing interests amid regulatory scrutiny
A look under the hood of Span 2, CME’s new margin engine
VAR-based framework has new ways of netting contracts and setting volatility floors and more
CME no longer looking back to Lehman
Changes to rates margin model move CCP into line with rivals
Uniform? Op risk capital rules go their own ways
Europe and Canada set to include historical losses in new standardised approach; Australia probably not
Libor switch spells trouble for loan systems
Lenders face costly updates to ageing legacy platforms to cope with new risk-free rates
Asia awaits term SOFR solution for local benchmarks
Singapore, Thailand and the Philippines look at ways to replace Libor in benchmark calculations
Mifid redux? Esma insists on LEIs for repo collateral
Mifid-style ruling will bar firms from using securities without identifiers in financing transactions
Revealed: FRTB impact three times higher than expected
Undisclosed Isda study finds capital hike outweighs previous Basel Committee estimate
Buy side continues with IM prep despite delays
Firms looking at custodian types, docs and trading strategies to optimise margin
Sefs stall, but more liquidity may be coming
The hoped-for competition among Sefs never was. But banks and prop traders might be facing off on swaps
Time for a (proper) G-Sib speeding ticket
Fed’s systemic risk assessment has become box-ticking exercise, and US banks are getting away with it
Big US banks hold more Treasuries as swaps collateral
Government securities made up 8.2% of all initial and variation margin at G-Sibs in Q2
State Street, UBS and TD Group incur VAR breaches
Backtesting exceptions cause TD Group's and State Street's market risk capital charge multipliers to climb
SA-CCR switch cuts leverage of two Japanese banks
Leverage exposures for Nomura and Norinchukin fall ¥4.7 trillion in aggregate
In hunt for yield, US insurers turn to illiquid assets
Mortgage exposures grow 72% in eight years since 2010
Barclays seeks op risk capital relief
Bank claims that lifting of capital floor would raise CET1 ratio roughly 60 basis points
Cleared swaps surge $6.6trn at US G-Sibs in Q2
Cleared swaps accounted for 54% of G-Sib notionals in Q2
Op risk data: Mifid fines hit $140m
Top five: Deutsche pays €175m to settle derivatives bribery claims. Data by ORX News
Credit data: Italian banks find themselves at a crossroads
Political chaos in Italy could undermine the banking sector’s recent improvement
Swaps data: analysing the US rates collapse
Prices collapse and expected worst-loss numbers hit new records
Backtesting expected shortfall: mission accomplished?
A rigorous backtest for ES cannot exist, but a good approximation might do the job
The minimally biased backtest for ES
Acerbi and Szekely present a backtest for expected shortfall
Levelling the playing field of the FRTB’s forex rules
Hany Farag argues that changing the base currency may address FRTB forex asymmetry
ING issues ESG-linked interest rate swap
Dutch bank takes carrot-and-stick approach on interest rate swap for oil and gas equipment firm
