The author proposes a repo haircut model that will identify capital for repo default risk as the main driver of repo spreads and allow investors to settle at an optimal combination of the haircut and repo rate.
Counterparty Radar: New data shows wide variation in haircuts, with biggest clients – like BlackRock and Pimco – getting best terms
Investors could see a 40% haircut on the bonds, but it’s never that simple
A pricing method for borrowed securities that includes haircut and indemnification is introduced
Concerns over non-bank leverage may derail push to include haircuts in bank capital rules
Council will ban resolution authorities from dipping into clearing members’ initial margin
The week on Risk.net, September 21–27, 2019
EBA says hedge funds will skirt the rules, but Basel and FSB want haircut minimums in place
Many worry that EU government bonds are now in play for international arbitration
Banks fear capital hit unless regulators provide exemption for stock borrowing
Isda AGM: Parliament tackles big issues in recovery and resolution text, but 'doesn’t go far enough'
No explicit ban in parliamentary text; banks say method could spark exodus from stricken CCPs
HSBC’s Wujiang Lou says parametric modelling of haircuts has many advantages over historical VAR
Wujiang Lou develops a parametric haircut model to conduct sensitivity tests and capture market liquidity risk