Return of the DPCs

They fell out of favour during the crisis, but derivatives product companies are set for a dramatic reappearance as banks seek to limit their collateral posting obligations – if regulators and counterparties can be persuaded of the benefits, that is. Lukas Becker reports


From photos of glassy lakes, alpine hillsides and snow-capped peaks to functional black-and-white text – like the rest of the financial markets, the annual report of Merrill Lynch’s derivatives product company (DPC) went through a cruel transition between 2007 and 2008. The second of those reports doesn’t even feature a logo – just words and numbers. And in later years, the numbers confirm a dramatic fall from favour: between 2008 and 2010, there was a 55% drop in the notional volume of client

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Credit risk & modelling – Special report 2021

This Risk special report provides an insight on the challenges facing banks in measuring and mitigating credit risk in the current environment, and the strategies they are deploying to adapt to a more stringent regulatory approach.

The wild world of credit models

The Covid-19 pandemic has induced a kind of schizophrenia in loan-loss models. When the pandemic hit, banks overprovisioned for credit losses on the assumption that the economy would head south. But when government stimulus packages put wads of cash in…

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