Macroeconomics
ICAAP/ILAAP – Unlocking business value from capital and liquidity assessment
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…
EU’s 2020 stress tests are toughest to date
Real GDP projected to contract –4.3% over three-year scenario horizon
Sovereign spreads and Target2 anomalies
Widening risk imbalances between eurozone member states threaten monetary union, says Italian regulator
Fixing the roof while the sun – wait, is that rain?
The Fed is split on whether to apply a countercyclical buffer. But so is everyone else
Credit portfolio stress testing using transition matrixes
In this paper, the authors propose a new methodology for modeling credit transition probability matrixes (TPMs) using macroeconomic factors.
Models need longer datasets to handle economic cycles – research
Decades, not years, of credit losses required for accurate risk modelling, argues expert
Can nowcasting unlock factor timing?
Fulcrum Asset Management is running tests to see if fresher data can help improve factor allocations
Asset managers brave patchy data to nowcast China’s GDP
Techniques include using many datasets, relying on proxies and continually reviewing models
Canadian Big Five hoard reserves as credit outlook decays
Four of the five largest Canadian lenders saw provisions rise, with BMO the only outlier
Fed economists float new way to project op risk losses
Researchers suggest combining firm’s size with loss history to best predict losses under CCAR
Buy-side modellers seek ‘Holy Grail’ of investing
When stocks and bonds fell in tandem this year, it sparked a debate about whether a lasting regime shift could be predicted
BMO shrinks loan-loss provisions as US outlook improves
US provisions for credit losses drop from C$110 million to C$44 million year-on-year
The Fed’s heavy hand on economic equality
Monetary policy and bank regulations contribute to widening US wealth gap
Ex-Fed trader Coffey on macro risks and VAR
Myopic models are creating feedback loops, warns founder of new macro firm Avoca
Optimal investment and financing with macroeconomic risk and loan guarantees
This paper considers an entrepreneur who has no assets in place but possesses an option to invest in a project incurring a lump-sum investment cost, of which a fraction must be financed by entering into an equity-for-guarantee swap.
Crisis alert: new model aims to give early warning of downturn
Academics say tool could offer policymakers up to three years’ notice of impending crash
Esma to referee AMF-FCA dispute over inducements
EU authority set to clarify whether buy side needs to pay for macro research in Mifid II
Rating momentum in the macroeconomic stress testing and scenario analysis of credit risk
This paper focuses on the corporate stress testing models for credit risk.
RBS must raise £2bn after failing stress tests
Lender releases new capital plan after worst performance in BoE test
Multiple NPL models better than single models, research finds
Combinations of models produce better NPL estimates in study of Greek crisis
Macroeconomic theories: not even wrong
Flawed and inconsistent mainstream macroeconomic theories such as efficient market hypothesis are dangerous to society, says Alexander Lipton
The application of credit risk models to macroeconomic scenario analysis and stress testing
The authors demonstrate how different credit risk models can be efficiently implemented for scenario analysis and stress testing execution with concrete application examples.
ECB flags threat of ‘abrupt reversal’ in risk premia
Latest review identifies two ‘medium-level systemic risks’ to eurozone