Modelling
FRTB internal models: quo vadis?
Two risk experts explore how to adjust the FRTB framework to promote internal model usage
Convex volatility interpolation
The modelling of implied volatility surfaces is reframed as an optimisation problem
‘The models are not bloody wrong’: a storm in climate risk
Risk Benchmarking: Risk.net’s latest benchmarking exercise shows banks confronting decades-long exposures, while grappling with political headwinds, limited resources and data gaps
Markets never forget: the lasting impression of square-root impact
Jean-Philippe Bouchaud argues trade flows have a large and long-term effect on asset prices
The state of IMA: great expectations meet reality
Latest trading book rules overhaul internal models approach, but most banks are opting out. Two risk experts explore why
When betas meet the cross section: a hybrid risk model for equity portfolios
The authors propose an application of Kelly et al's 2018 model combining regression-based betas with cross-sectional and time series elements, enhancing precision, reducing data needs, and simplifying multiregional models while effectively optimizing…
Santander SVAR surge lifts IMA RWAs 22%
Third-quarter spike contrasts with broad European declines
Allocating financing costs: centralised vs decentralised treasury
Centralisation can boost efficiency when coupled with an effective pricing and attribution framework
EVE and NII dominate IRRBB limit-setting
ALM Benchmarking study finds majority of banks relying on hard risk limits, and a minority supplementing with early-warning indicators
Responsible AI is about payoffs as much as principles
How one firm cut loan processing times and improved fraud detection without compromising on governance
The relative entropy of expectation and price
The replacement of risk-neutral pricing with entropic risk optimisation
The importance of modelling futures dynamics in commodity index derivatives
Index-based and underlying-based pricing methods for commodity derivatives are presented
Most banks stick to tried-and-trusted XVA models
Black Scholes- and Heath-Jarrow-Morton-based approaches dominate, with some exploring Copulas for wrong-way risk, post-Archegos
Lloyds draws a (second) line on AI risk
Model risk office is accountable for managing the risk of AI roll-out at the UK bank
Tomorrow’s Quants: what it takes to be a next-gen modeller
Employers increasingly prize mix of hard and soft skills, Risk.net survey reveals
DFAST model changes would boost capital ratios
But category IV banks would suffer amid PPNR overhaul
Why banks don’t believe each other’s IRRBB models
Regulatory outlier test results prompt mutual suspicion of unrealistic deposit assumptions
Cyber risk triggers alarm bells for credit portfolio managers
Attack on Jaguar Land Rover highlights difficulties modelling unpredictable impact of outages
When AI models malfunction, address the problem not the math
Governance of artificial intelligence models should focus on actionable outcomes rather than interpretability, argues former chief regulator
Some European banks still failing net interest income test
Swedbank joins seven other outliers after it updates methodology assumptions
BNPP, Deutsche among EU banks hit by VAR breaches in April
Sharpest rise in backtesting exceptions since 2022 Ukraine war shock largely linked to tariff chaos