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Inflation scenarios: tail risks loom for US equities
Portfolios could lose more than one-third of their value if inflation stays high, suggests crowd-sourced scenario exercise
Fed: banks may need AI risk systems to cope with smart devices
Tenfold increase in web-enabled devices via 5G and IoT means explosion in cyber threats, says official
In euro swaps tug of war, EC considers Eurex trading quota
European Commission may force firms to channel minimum amount of swaps activity to EU clearing house
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Quotes
You’ll find all sorts of things happening in prime risk management, from sophisticated to not. Exposure in prime businesses is not appropriately remunerated. As the Credit Suisse fiasco demonstrates, the risks are huge and the leverage completely outsized.
Former head of one Wall Street prime brokerage
The models are saying ‘release, release, release’, as we get out of the crisis; 'given a good economic environment, we should be reducing reserves.’ But nobody’s comfortable with that, given that there’s still a lot of uncertainty in the economic environment.
Senior credit risk executive at a large US regional bank
Some critics have continued to argue that CCPs’ initial margin increases had negative knock-on effects in other parts of the financial system. These critiques persist despite the lack of supporting evidence.
CME Group publishes research rebutting accusations that its margins are procyclical
Editor's Choice
Cyber optics: are banks downplaying the SolarWinds hack?
In the wake of the watershed breach, banks eye supply chain risk while talking down the hack’s impact
Big Figure
Bearing down
Using survey responses from Risk.net’s latest crowd-sourced scenario-generation exercise, analytics firm Sapiat created a range of stress scenarios. To do this, the modellers leveraged extreme yet plausible negative predictions from a handful of the most pessimistic respondents from the survey population – “the five bears”, as Tim Wilding, Sapiat’s head of research, dubs them. Three stress scenarios were generated, following the contours of the three original regimes (low, moderate and sharp inflation), and used to shock the same exemplar portfolio. “As a crowd within the crowd, the five bears are formulating a stress scenario that may appear somewhat extreme, but that is still strongly consistent with model assumptions,” says Wilding.
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How Athora uses its ties to Apollo to boost returns
European life insurer boosts returns by sourcing loan assets directly from private equity firm
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Our Take
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