Risk magazine
European Parliament’s IAS 39 clearing eligibility proposal criticised by accountants
Accountants condemn a proposal to use IAS 39 as a means to determine whether a derivative has to be cleared through a central counterparty.
Isda credit auction sets 20% Ambac recovery rate
Protection sellers on monoline face 80% cash value payout
Financial reform to be decided in US
US financial reform edges closer as legislators prepare for the reconcilation of the House and Seante bills
Industry urged to stop fighting Basel III and negotiate transition period
Banks should focus on the timeline for implementation and stop resisting the Basel reform package itself, say regulators
Contagion fears drive volatility
The takeover of a Spanish savings bank last month and rumours of funding difficulties at the country's financial institutions spook investors
Lack of co-ordination contributes to European market sell-off
The Bafin decree on short selling in May signalled a lack of agreement by European regulators, say participants
Dealers and legislators left disappointed by CPSS-Iosco recommendations
Proposals on risk management by CCPs should be more detailed, say participants
Risk roulette on eurozone scenarios
The European Union and International Monetary Fund agreed a €750 billion emergency loan package in early May, aimed at averting a sovereign default and wider crisis across the eurozone. Nonetheless, banks have been preparing for the worst, stress testing…
Self-referencing CDS risk?
Ballooning credit default swap spreads on European sovereigns have encouraged some market participants to sell credit protection on their own country. But how much is this protection really worth, and could this selling contribute to systemic risk? Mark…
A long life for longevity swaps?
The market for longevity swaps is picking up pace, with several transactions completed over the past few months. But is this asset class here to stay or is it a response to market conditions? By Alexander Campbell
Risk institutional investor rankings 2010
The resurgence of market volatility and growing regulatory uncertainty have made the past 12 months challenging for investors. In this difficult environment, respondents to Risk’s institutional investor survey voted JP Morgan the top provider of…
IAS 19 to speed pension de-risking
Proposed changes to accounting standards will remove some of the reporting freedom enjoyed by pension funds and could steer them away from investing in equities towards the relative safety of bonds and swaps – a development that could have an impact on…
Too networked to fail?
The need to craft special treatment for banks that are too big or interconnected to fail has long been a concern for regulators, but of equal importance is the challenge of identifying which institutions should be subjected to such measures. How can…
When market and credit risk collide
The financial crisis highlighted that interactions between market risk and credit risk could expose banks to greater risks than had been assumed. Banks are responding by altering their structure and the models they use – but it is by no means an easy…
Spotlight on Goldman
The US Securities and Exchange Commission filed a lawsuit against Goldman Sachs in April, alleging it had misled clients by not disclosing that a major hedge fund had helped select the underlying assets in a collateralised debt obligation and was…
Harbouring doubts on close-out netting
Derivatives safe harbours are viewed as crucial to close-out netting. However, they are under siege from the US Congress, where legislators have tried to undo the protections given to market participants when a counterparty defaults. Mark Pengelly reports
Hopes grow for liquidity risk recalibration
Conservative concerns
Asia plays catch-up on CCPs
While European and US regulators blaze a trail in over-the-counter derivatives reform, Asian supervisors have been much more circumspect. Some are now exploring the use of central clearing but many are still wrestling with how best to implement it. Matt…
Slow ahead for euro rates business
Investors have grown increasingly worried about exposures to eurozone sovereigns given the problems faced by Greece and others. Christophe Mianné, head of global markets at SG CIB, warns the second quarter will prove to be tough for the European rates…
A bottom-up model with top-down dynamics
Yadong Li proposes a flexible, tractable and arbitrage-free bottom-up dynamic correlation modelling framework with a consistent stochastic recovery specification for multi-name credit derivatives. In this framework, the model’s spread dynamics can be…
The value of a variance swap – a question of interest
Pricing equity variance swaps is well understood in the case of deterministic interest rates, but particularly for longer-dated swaps the stochastic nature of the rate cannot be ignored. Here, Per Hörfelt and Olaf Torné derive the fair strike when both…