Risk magazine - Sep 2020
Welcome to the online edition of Risk September.
Articles in this issue
XVA traders have no time to rest on laurels
Markets have calmed, but they may not be out of the woods yet
SOFR basis blows out amid CCP discounting changes
Rate cuts may have exacerbated discount risk as basis swap opt-outs move deeply in-the-money
SocGen mulls sale of structured product books after big losses
Rival Natixis also plans to place parts of its equity derivatives business in run-off mode
New Tradeweb/IBA benchmark tipped as ‘competitor’ to SOFR
Forward-looking risk-free rate aimed at US mortgage market could have broader applications
Stanford’s Duffie shakes up SOFR credit race with AXI index
Academics propose new credit index that ditches Libor tenors for a single funding spread
After Covid, CCPs face calls for revamped disclosures
Banks and buy-side firms working with clearers to provide more granular info on margin shortfalls
Ronin, felled prop giant, shuts up shop
Firm cancels regulatory licences; traders receiving payouts on equity stakes
Fed’s approach to stressing op risk frustrates banks
Regulator’s stress test results overshoot banks’ numbers, threatening capital plans
People moves: Huey Evans joins IHS Markit board, new tech risk head at HKeX, and more
Latest job changes across the industry
The changing shape of buy-side risk technology
Buy-side risk managers and FactSet’s global head of quantitative analytics gathered for a Risk.net webinar to discuss topical risk management trends for asset managers and to consider the industry challenges posed by the recent Covid‑19 pandemic
CVA desks arm themselves for the next crisis
March’s volatility forces dealers to fine-tune hedging strategies
Inside the Fed’s secret liquidity stress tests
Lobbyists and Quarles train sights on horizontal exams that can shape bank risk appetite
Mega-hedges and generational strife at PGGM
Buy-side risk survey: for Dutch pension giant, battle between young and old shaped response to March mayhem
Managing AML and fraud – A risky business needs a risk-based approach
Financial services organisations (FSOs) are expected to meet strict financial crime regulations regardless of their size, and those with smaller budgets and fewer resources are finding this increasingly difficult as regulations, guidelines and threats…
Quant finance courses tested by Covid’s echoing classrooms
Universities fret over drop in international students and demands of online learning
The unintended impact of swap stays on financial stability
As swaps leverage shrinks, bankruptcy stay rules are not guaranteed to reduce systemic risk, says economist
Moonshots shelved: banks spend on home-working tech
Dealers made success of remote working switch – now they’re investing in its future, and pausing grander ambitions
Race to cash in on term Sonia is filled with twists
Pending merger and FCA’s effort to create synthetic Libor rates could sway outcome
Rival SOFR conventions splinter loan market
Diverging approaches to calculating interest payments sow uncertainty and hedging concerns
FX swaps platform aims to cut out the banks – but not entirely
Peer-to-peer newcomer FX HedgePool targets asset managers’ month-end hedging activity
EBA’s software compromise draws fire on two fronts
UK regulator suggests it will neuter the proposed capital relief, which banks say doesn’t go far enough
CFTC block trade plan gets cold shoulder
Industry divided over swaps reform proposal, and advisory committee casts doubt on need for it
EU hands CCP members a narrow win on skin in the game
Clearing members could use the final rules to push for higher CCP capital globally
Funds turn to stress-testing in fast-forward and reverse
Buy-side risk survey: Covid-19 is changing the way investors think about stress tests
How UBS AM dealt with Covid-19 crunch
Buy-side risk survey: Swiss giant had planned for liquidity squeeze, says CRO – but not one like March
The long-term effect of Covid-19 on market risk capital
Covid-19 has replaced the global financial crisis in some banks’ stressed VAR calculations
Internal stress tests of EU banks not up to scratch – ECB
Only one in 10 banks’ internal tests are tougher than supervisor-run programmes
Systemic US banks’ leverage exposures shrank $1.4tn in Q2
On-balance sheet exposures fall on Fed relief
Top banks defer €1.6bn of profits on hard-to-value trades in H1
BNP Paribas set aside €532 million alone in H1
Tougher OTC trading conditions to persist, say European banks
Seventy-three per cent of respondents expect tight price and non-price terms through September
Deposit flows shape systemic US banks’ liquidity risk
Non-operational deposits accounted for over 25% of cash outflows in Q2
Fed dollar swap operations slow as funding strains ease
Seven-day swap utilisation has dropped off since May
To make sense of complex systems, send in the agents
Standard quant models cannot comprehend a radically complex reality, writes Jean-Phillippe Bouchaud
Time to move on from mean-variance diversification
A new diversification measure appears to produce better results than mean-variance optimisation
Equally diversified or equally weighted?
New diversification measure enables construction of equally diversified portfolios
Benchmark reform goes non-linear
Terminating Libor will bring great challenges to the pricing of non-linear rate products
The data anonymiser
Non-parametric approaches anonymise datasets while reproducing their statistical properties
For a post-Covid world, quant fund revives a contentious idea
Crisis puts out-of-vogue practice of “porting” alpha back in play
