Modelling
The relative entropy of expectation and price
The replacement of risk-neutral pricing with entropic risk optimisation
Lloyds draws a (second) line on AI risk
Model risk office is accountable for managing the risk of AI roll-out at the UK bank
Tomorrow’s Quants: what it takes to be a next-gen modeller
Employers increasingly prize mix of hard and soft skills, Risk.net survey reveals
DFAST model changes would boost capital ratios
But category IV banks would suffer amid PPNR overhaul
Why banks don’t believe each other’s IRRBB models
Regulatory outlier test results prompt mutual suspicion of unrealistic deposit assumptions
Cyber risk triggers alarm bells for credit portfolio managers
Attack on Jaguar Land Rover highlights difficulties modelling unpredictable impact of outages
When AI models malfunction, address the problem not the math
Governance of artificial intelligence models should focus on actionable outcomes rather than interpretability, argues former chief regulator
Some European banks still failing net interest income test
Swedbank joins seven other outliers after it updates methodology assumptions
BNPP, Deutsche among EU banks hit by VAR breaches in April
Sharpest rise in backtesting exceptions since 2022 Ukraine war shock largely linked to tariff chaos
SRT growth raises fresh questions on valuation and risk
SRT growth and the implications for banks, investors and regulators
Regional banks favour scenario analysis over op risk modelling
Domestic and smaller regional players favour scenarios to gauge tail exposure; G-Sibs stick to modelling, for now
Speedy onboarding: the push for faster model approvals
Europe’s banking watchdog is planning to streamline how it authorises credit model updates. Not a moment too soon, say bankers
Generative AI brings testing times for modellers
Flagstar’s lead model validator offers some tips for safely integrating LLMs into risk models
Systemic importance identification and risk supervision of banks: evidence from China
Investigating systemic risk, the authors build an interbank network based on tail dependence and suggest typical network centrality measures can suffer from redundancy issues.
Market shocks push IRC to records at EU banks
Component for default and migration risk hits new highs at several dealers
Quantum path integrals for default intensity models
A method to price credit derivatives via default intensity approximation is presented
A three-stage fusion model for predicting financial distress considering semantic and sentiment information
The authors apply sentiment analysis to management discussion and analysis texts to aid the prediction of financial distress with an innovative three-phase fusion model.
JP Morgan’s VAR limits blown twice during haywire Q1
Breaches add to the two regulatory backtesting exceptions sustained the previous quarter
Getting a handle on model parameters
Mean reversion in rate parameters opens the door to dimensionality reduction
FRTB may bite harder for Europe’s CVA modellers
Farther reach of advanced approach and lighter load on total requirements mean limited takeaways from Canada and Japan’s implementation
UBS’s CVA charges spike by 30% under new market risk regime
Proportional impact is higher than at any FRTB adopter so far