Modelling
Why AI agents are like staff you can’t trust
Uncertainty implicit in GenAI systems means risk managers have to take a more adversarial approach
Banks building GenAI governance in parallel to model risk
Risk Benchmarking: Majority have established AI governance committees, but ownership is fragmented
Lower-risk models face excessive reviews, banks say
Risk Benchmarking: Validation workload stretching teams, amid emerging regulatory divergence
Model risk managers see growing regulatory divergence
Risk Benchmarking study finds most banks expect easing of model risk supervisory scrutiny in the US, but tightening in Europe
Model risk managers are being asked to do more with less
Risk Benchmarking study finds function being handed expanding AI workload, on flat resources
US banks more optimistic than Fed on loan losses
JP Morgan, BofA and Wells Fargo stray furthest from Fed’s estimates
A third of banks do not maintain logs for GenAI models
Risk Benchmarking study finds few banks review prompt logs systematically, with larger firms focusing on higher risk use cases
DB USA undershoots Fed capital decline by 3.4pp in DFAST 2026
Nine banks project smaller CET1 falls than the Fed
Tailoring tails within the mixture model framework
Introducing a data generator mixing Gaussian and Student-t distributions to capture fat tails
From gatekeeper to coach: model risk bids to reinvent itself
Model Risk Benchmarking data reveals a function in flux, grappling with resource cuts, AI models, regulatory divergence
Banks welcome UK IMA eligibility test delay, but some want more
Risk Live: PRA extends monitoring for ‘Spearman’ test, while US regulators drop correlation metric
AI autonomy may redefine risk management roles
Risk Live: Machine validation of autonomous processes may emerge “relatively soon”, EIF risk chief says
Treat AI models as would-be hackers, says quant
Risk Live: Models capable of “strategic deception” require different risk management, says former Risk.net quant of the year
Managing AI models is reshaping three lines of defence, say banks
Risk Live: Model managers want seat at table during development, and expect first line to take charge of AI model testing
US FRTB glitch could spit out negative capital charges
Effort to recognise risk diversification between IMA and standardised approach went too far
Half of banks use scenarios to set third-party Pillar 2 capital
Risk Benchmarking study finds resilience risk less widely covered than cyber and IT disruption, but more formalised where scenarios exist
Why do prices jump? by Jean-Philippe Bouchaud
After years of investigation, we still aren’t sure, says Jean-Philippe Bouchaud
Don’t mind the gap risk: regulatory treatment of credit repacks
Gap risk in repackaging is not a credit valuation adjustment for Basel III capital purposes, argues senior quant Andrey Chirikhin
Second line seeks to stamp its authority on AI risk
Risk Benchmarking study finds fragmented accountability for AI risk among banks, and most are short of controls to contain it
Vinicius fortune: quantifying luck in the World Cup draw, by Julien Guyon
Julien Guyon explains how bias, variance and luck affect teams in this summer’s tournament – and explores wider relevance for portfolio managers
The race to model private market risks
BlackRock maps holdings to risk factors; competitors aim to get the best from statistical methods