Risk magazine - Volume22/No5

Out of the comfort zone

US banking supervisors will complete stress tests early this month to determine if the country's largest banks need to hold more capital to withstand a worsening in economic conditions. But industry practitioners raise concerns about the effectiveness of…

Raiders of the loss arc

Regulators are looking at ways to remove pro-cyclicality from accounting standards, with some advocating the scrapping of incurred loss models in favour of dynamic provisioning

Formula, non

The decision by the French government last year to alter its Livret A inflation-linked savings rate formula introduced huge complexity for banks offering Livret A hedges. However, a further change this year has proven to be the last straw, forcing many…

The fast track

Modern trading and risk technology systems are large and complex, but banks are becoming increasingly wary of running into implementation difficulties. As a result, technology vendors are packaging their systems so they are quicker and simpler to get up…

Can the centre hold?

Despite the inevitability of tighter and more intrusive regulation, David Rowe argues this alone will not prevent future financial crises as long as 'too big to fail' remains an issue

A new master

China took another significant step forward in the development of a unified single master derivatives contract in March with the launch of the revised Nafmii Master Agreement. Chin-Chong Liew, Simon Zhang and Chris Zhao of Linklaters look at the…

Managing diversification

Attilio Meucci introduces a diversification index that represents the effective number of bets in a portfolio. With this index, based on entropy and constrained principal component analysis, he performs mean-diversification management adjusted for…

Pricing options on film revenue

This article illustrates two models for cumulative revenues from films, a time-changed gamma process and a compound Poisson process, and how these models can be used to price options. Don Chance, Eric Hillebrand and Jimmy Hilliard find that while both…

Revitalising the markets

Governments are facing unprecedented pressure to finance bank rescue schemes through huge debt issuance. With supply coming thick and fast, the UK Debt Management Office (DMO) has been steering a hazardous path to place its debt into the markets. Until…

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