Risk magazine
Shipping out
The shipping industry has suffered huge losses in recent months, with the Baltic Exchange Dry Index sinking 94% between May and December last year. What are the knock-on effects for the developing freight derivatives market? Christopher Whittall…
Improving the risk governance process
Bill Schlich and Hank Prybylski expound on how and why an organisation-wide view of risk is still an aspiration for many banks
Robust asset allocation under model risk
Financial investors often develop a multitude of models to explain financial securities' dynamics, none of which they can fully trust. Model risk (also referred to as ambiguity) prevents investors from using the classical framework of expected utility…
Being two-faced over counterparty credit risk
A recent trend in quantifying counterparty credit risk for over-the-counter derivatives has involved taking into account the bilateral nature of the risk so that an institution would consider their counterparty risk to be reduced in line with their own…
All in Accord?
Klaas Knot, head of the Basel Committee's risk monitoring and management group, talks to Alexander Campbell
Credit solution
Many companies have used hedge accounting rules for interest rate hedges, but hedge accounting for credit risk is much less common. Dirk Schubert argues hedge accounting for this type of risk can be applied, and proposes a possible solution
Guilty or not?
Rating agencies have been widely criticised for assigning AAA ratings to securitisations backed by subprime mortgages. Ashish Dev and Bo Qian argue that while the criticism is justified for some securitisation structures, there was a basis for assigning…
The danger of two cultures
A 50-year-old essay on the failure of communication between scientists and literary intellectuals might offer lessons for the future of modern finance, argues David Rowe
Revolving draws
As uncertainty cloaked the capital markets late last year, a number of corporates tapped committed revolving credit lines originally intended as backstop facilities. Could a potential surge in drawdowns affect banks already constrained by capital?…
Perfect storm
The fall in equity prices, combined with a sharp drop in bond yields, has decimated the funding positions of pension schemes across the globe. With many companies tottering under the weight of ballooning pension deficits, could this be the spark for the…
Misery for municipals
A year on from the collapse of the auction rate securities market, short-term variable-rate financing in the US remains scarce. In 2009, municipal issuers face surging costs and low interest rates most can't access. By Peter Madigan
The Rubik's cube of risk
The financial crisis has emphasised the need for integrated risk management and closer collaboration between trading desks and the middle office, covering market risk, collateral management, limits and counterparty risk exposure calculation. How well are…
When hedge funds attack
The financial crisis has combined with catastrophic performances among hedge funds to decimate the fund derivatives industry, staunching new deal flow and causing many banks to pull out of the business. Mark Pengelly reports
Breath of Liffe
Amid fierce competition and regulatory scrutiny, the combined initiative by derivatives exchange Liffe and clearing house LCH.Clearnet for clearing credit default swaps was launched on December 22. Will the two companies have a first-mover advantage? By…