Risk magazine
The chemistry of compensation
Regulators across the world are clamping down on executive compensation in a bid to align employee remuneration with sound risk management principles. Despite the good intentions, many of the proposals could have unintended consequences. Peter Madigan…
Dealers in $128m ARS repurchase as legal actions continue
Three securities firms are to repurchase $128 million in auction-rate securities (ARS) from aggrieved holders of the illiquid instrument and will pay $600,000 in fines in the latest in a spate of regulatory actions in response to the mis-selling of the…
Starting from scratch
Zahid Molla, head of risk management, Afghanistan International Bank, talks to Alexander Campbell
Last option before the armageddon
Damiano Brigo and Massimo Morini show how the pricing of credit index options depends on the probability of a financial portfolio 'armageddon'. They introduce a new equivalent pricing measure that lays the foundation for a market model framework in multi…
Calibration of local stochastic volatility models to market smiles
Pierre Henry-Labordère introduces a new technique for calibrating local volatility extensions of arbitrary multi-factor stochastic volatility models to market smiles. Although approximate, this technique is both fast and accurate. The procedure is…
Financial network risk
Both macroeconomics and financial theory have failed to deal adequately with systemic risk. However, other disciplines have much to teach us about the stability and fragility of complex dynamic systems, argues David Rowe
It's NOT the econometrics, stupid
Risk modelling has come under the microscope since the onset of the crisis, with many blaming market risk models for exacerbating the crisis. Elizabeth Sheedy presents a defence of quantitative techniques
Unlocking information
Throughout the crisis, banks have been criticised for failing to provide the quantity and quality of information needed for investors to gauge their financial health. But that trend could be reversed, with the Basel Committee zeroing in on disclosure as…
Murky business
A growing number of observers claim activity by some high-frequency trading firms amounts to little more than manipulation. Some people are throwing around words like 'criminals', 'indictments' and 'theft'. Is there any evidence of wrongdoing? Duncan…
Commodity crackdown
The Commodity Futures Trading Commission (CFTC) has held hearings to determine whether it should set absolute position limits for energy and commodity market participants. How would CFTC-mandated position limits affect institutional investors, exchange…
Flying low
Extreme volatility in oil markets has caused hundreds of millions of dollars in losses on airline fuel hedges. At the same time, burgeoning margin calls have forced some to get creative with collateral agreements. How is the airline industry adapting? By…
Interdealer rankings 2009: Brokers
The top interdealer brokers remain largely unchanged from last year, despite the unprecedented market conditions. But a push towards central clearing and exchange trading by regulators could lead to a shake-up in the industry. By Alexander Campbell, with…
Interdealer rankings 2009: Dealers
In one of the most tumultuous years on record for the derivatives industry, Deutsche Bank has reclaimed top spot overall from JP Morgan in the 2009 interdealer rankings. In the other major change, Barclays Capital broke into the top three, knocking…
Ahead of the herd
The UK Financial Services Authority will finalise its new liquidity requirements by the end of the year, but certain aspects of the proposals remain highly contentious, and the regulator has been criticised for rushing ahead of the Basel Committee, which…
Pensions puzzle
Senior politicians in Brussels are calling for Solvency II to be extended to incorporate occupational pension schemes. But actuaries and other solvency experts say this would be a disaster for plan sponsors and members. John Ferry reports
Rethinking and revaluing
Many US insurance companies have reported massive losses on the hedging of variable annuity products. European variable annuity providers, however, have faced problems of their own. Matt Cameron reports
Buy-side battle
Central clearing has dominated the agenda of credit derivatives dealers this year. With regulators pushing for buy-side firms to have access to clearing platforms, dealers and clearing houses are finding there is a great deal of work still to be done…
A tangled web
One year on from the collapse of Lehman Brothers, administrators are still trawling through the complex web of special-purpose vehicles launched by the broker-dealer. A number of lawsuits have resulted - and the rulings could see US and UK courts at…
Provisioning for the future
A growing number of regulators have highlighted dynamic provisioning as a means of lessening pro-cyclicality in the financial system. José Mar√≠a Rold√°n, director-general of banking regulation at the Banco de Espa√±a and chair of the Standards…
Opening cards
Unprecedented losses on credit card loans are haunting banks and could cause pain for investors in credit card asset-backed securities (ABSs). But despite this, dealers say government support has rehabilitated the market for credit card ABSs. Mark…
Warranting approval?
The US Treasury has come under fire for allowing banks to repurchase warrants held under its Troubled Asset Relief Program at a discount. Is the criticism justified? And what effect is an auction of JP Morgan's warrants likely to have? Mark Pengelly…
