Market risk modelling
A look at future exposures, through a 19th century lens
Can a centenarian maths idea speed up the calculation of forward sensitivities?
Most EU banks use historical simulation approach to VAR
Few lenders favour Monte Carlo or parametric methodologies
Fourteen EU banks face sanctions for poor market risk models
Twenty lenders lowballed capital requirements
Model change pumps up Deutsche’s VAR capital charge
Switch to historical simulation approach increases requirement by 71%
Top US banks’ market risk charges surged in 2020
Citi ended year with highest charge of the G-Sibs, at almost $9 billion
HSBC pares down market RWAs after model update, VAR change
Risk-weighted assets for trading exposures fall $2.8 billion quarter on quarter
Profit-making trading days at systemic US banks soared in 2020
Citi had the most winning days of the G-Sibs in 2020, with 170
Credit Suisse updates VAR disclosure to cover banking book
Non-trading positions accounted for 31% of market risk exposure in Q3
UBS factors in Covid shock to stressed VAR, causing RWA surge
Market RWAs increased 11% quarter on quarter
Goldman’s 2020 VAR was its highest in nine years
Trading revenues at the New York-based dealer were the highest in a decade
IM, default fund resources fell at Eurex in Q3
Total collateral held remains elevated compared to pre-coronavirus crisis
Barclays leads Europe’s banks on trading risks
Top 20 banks with most trading risks accounted for 79% of market RWAs across EBA sample
Basel FRTB capital impact study confused by outliers
“Conservative estimation” of market risk capital uplift averages 69%
Scotiabank’s capital ratio improves on fading market risks
VAR-based RWAs dropped 44% quarter on quarter
Systemic US banks’ market risk charges fall from Covid highs
Citi an outlier as its capital requirements increase in Q3
UBS market RWAs dropped 25% in Q3 as VAR cooled
High value-at-risk outputs dropped out of averaging window in Q3
Top US dealers’ trading risk indicators varied in Q3
VAR drops sharply at JP Morgan and Goldman, stays steady at Morgan Stanley and rises at BofA
Factoring in Covid turmoil amped Bank of America's VAR in Q3
Value-at-risk averaged $109 million over three months to end-September
VAR spasms heap market risk charges on EU G-Sibs
VAR-based charges increase 94% on end-2019
JP Morgan shook up market risk stress tests in Q2
Bank switched stressed VAR historical periods 60 times
RBC’s VAR doubled in pursuit of trading windfall
Stressed VAR also surged as the bank switched stress periods
Market, interest rate risks surged at Commonwealth Bank in H1
Market RWAs jumped 129% over the first half
Goldman breached VAR limit 16 times in H1
US dealer also racked up 40 days on which trading profits exceeded $100 million
Market risks push Allianz’s Solvency II ratio lower in Q2
Whipsawing markets help take three percentage points of the firm’s core solvency ratio