Equity-debt correlation breakdown and negative bond yields make investors nervous
Losses put at roughly $150m – even before markets tanked on March 9
Regulators consider banks’ internal capital adequacy and assessment process (ICAAP) and internal liquidity adequacy assessment process (ILAAP) important tools in managing risk. The European Central Bank’s (ECB’s) updated guidance – which came into effect…
An internal default risk model: simulation of default times and recovery rates within the new Fundamental Review of the Trading Book framework
This paper presents a new default risk model for market risk that is consistent with these requirements. The recovery rates follow a waterfall model that is based on a minimum entropy principle.
Outmoded classifications of securities may be concealing market risk. AI has a better idea
Machine learning shows promise in grouping assets better, predicting regime shifts
As the next phases of uncleared margin rules come into force, there will be an economic driver for more clearing of FX. By Phil Hermon, Executive Director of FX Products at CME Group
With the 2022 Fundamental Review of the Trading Book (FRTB) deadline looming, banks are fast coming to grips with the amount of work still to be done to achieve a successful implementation
Risk USA: Nobel laureate’s new ‘Geovol’ model suggests geopolitical risk no higher than during past 20 years
Political journalist Robert Peston has grave concerns over the future of Britain, seeing profound risks with or without Brexit
Alpha generation can be an elusive goal, particularly when trading volatility. Three different approaches to trading volatility were discussed by a panel looking at the role of systematic and carry strategies in finding profit in a high-volatility world
In this paper, the authors establish generalized autoregressive conditional heteroscedasticity–dynamic conditional correlation (GARCH–DCC) and constant conditional correlation (CCC) copula model frameworks to study time-varying correlation among credit…
Equity momentum and value strategies are cancelling each other out, buy-siders say
Regulator proposal could lead to less reliable market risk data, critics warn
This paper considers a definition of through-the-cycle as independent from an economic state that can result in a time-varying TTC probability of default.
This study investigates the systematic error that is made if the exposure pool underlying a default time series is assumed to be homogeneous when in reality it is not.
Exploring the risk thrown up by autocallables has created a new family of structured products, offering diversification to investors while allowing their manufacturers room to extend their portfolios, writes Manvir Nijhar, co-head of equities and equity…
For the past 30 years, emerging markets have provided return enhancement and risk diversification opportunities for global equity investors. The opening of the domestic Chinese capital market and its integration into international markets is likely to…
Parameter estimation, bias correction and uncertainty quantification in the Vasicek credit portfolio model
This paper is devoted to the parameterization of correlations in the Vasicek credit portfolio model. First, the authors analytically approximate standard errors for value-at-risk and expected shortfall based on the standard errors of intra-cohort…
This paper develops a parsimonious model for evaluating portfolio credit derivatives dependent on aggregate loss.
BlackRock, MSCI, LFIS among firms looking to replace traditional, linear risk models
The Basel Committee on Banking Supervision’s final revisions to the FRTB guidelines aim to address industry concerns around complexity and capital implications. A forum of industry leaders discusses whether the changes have been effective and how banks…