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The volatility surfaces are all out of whack because they’re marking SPY at the 3:15pm snap, and the SPX at 3pm.
A senior exec at a US FCM says a change to settlement times for options on the S&P 500 leave the contracts out of step with options on ETFs which track the index, and is causing risk management headaches.
The parameters in which you were operating before don’t exist any more. The stimulus or other items are just going to break the bounds of any model that was built pre-pandemic.
Joseph Silverberg, head of capital management and stress-testing at Deutsche Bank
The Fed and others are asking why we haven’t gone live either. They were saying: ‘This is supposed to be relief for Covid – why aren’t you taking advantage of it?’ We said: ‘You didn’t provide any sort of relief.’
A senior exec at a US bank relays a discussion with the Fed, who asked why his firm hadn't followed BofA in implementing SA-CCR.
Editor's Choice
FCMs fret over S&P 500 options settlement changes
Dealers say CME, Cboe settlement time shift for S&P 500-linked options causes risk management headache
Big Figure
Covid comparisons
Comparing the backtests on the S&P 500 using Risk.net’s latest set of crowdsourced stress scenarios (constructed by polling readers, and run once again in conjunction with RiskThinking.ai) and the last underlines how views have become more extreme. When Risk.net first asked participants to predict the impact of Covid in late March, the S&P was nearing a multi-year low of 2,191. Yet the range of views then – when markets were still in freefall, and central banks and governments had yet to firm up pledges of trillions of dollars in ultra-cheap credit and other support measures – was far narrower than it is now.
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Union beckons for the three quant tribes
Studies may be deferred, but future for grads is bright, argues UBS’s Gordon Lee
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