Profit & loss (P&L)
EU banks balk at new market risk models back test
EBA proposals introduce additional expected shortfall back test for market capital risk models under FRTB
After SVB downfall, EBA stress test seeks out unrealised losses
European regulator asks for data on the fair value and sensitivity of bonds and their hedges
Did US hedge accounting rules contribute to SVB’s recklessness?
Hedging and directional risk-taking was a problem, but FASB regime may have complicated matters
Investing in operational readiness to optimise FRTB capital
A forum of industry experts discusses the implementation of FRTB, the burden of investment into data and infrastructure for FRTB compliance, the considerations for banks in using the standardised approach (SA) and the internal model approach (IMA)
US banks’ VAR breaches up 2.5x in 2022
‘Hypothetical’ one-day losses exceeded VAR on 55 occasions, as losing trading days prevail
Leveraging data science for next-generation risk and P&L
Alexei Tchernitser, director of analytic solutions at Quantifi, discusses the impact data science has had on next-generation risk, and profit and loss (P&L)
US banks’ loss-to-VAR ratios fell in Q3
Largest daily trading losses were on average 84% of forecast, compared with 105% in Q2
As interest rates surge, bankers fret over last year’s models
IRRBB modellers trying to predict client behaviour have little relevant data to fall back on
RBI’s market risk gauges go haywire on Ukraine war fallout
Portfolio reshuffling helps Austrian bank contain RWA impact
An ‘optimal’ way to calculate future P&L distributions?
Quants use neural networks to upgrade classic options pricing model
Deep learning profit and loss
The P&L distribution of a complex derivatives portfolio is computed via deep learning
Corporate equity performance and changes in firm characteristics
The authors' findings affirm prior work illustrating the importance of profitability, size, liquidity, momentum and market returns, although we observe minimal evidence of the importance of investment in capital expenditures.
ECB’s Trim found 900 flaws with 31 banks’ market risk models
Remedying shortcomings added €11 billion to market RWAs in aggregate
JP Morgan had most profit-making trading days of top banks in Q3
New York-based bank posted 45 winning trading days in total
Eigenportfolios of US equities for the exponential correlation model
In this paper, the eigendecomposition of a Toeplitz matrix populated by an exponential function in order to model empirical correlations of US equity returns is investigated.
EU Parliament ‘likely’ to allow market risk capital relief
MEPs propose allowing supervisors to temporarily exclude Covid-related backtesting exceptions
Crédit Agricole leads French banks on return on RWAs
BNP Paribas only bank to improve RoRWA year-on-year
Hedging rate exotics, Bergomi-style
New paper by Nomura quant applies volatility model used in equities to exotic rate hedging
Currency risk in foreign currency accounts for small and medium-sized businesses
This paper estimates the currency exposure before and after the hedging of active foreign currency (FC) accounts, using stochastic models for spot exchange rates and cashflow movements.
Clearing house of the year: JSCC
Asia Risk Awards 2019
CVA, debt raising said to drive SoftBank CDS trading
Volumes rise as tech giant’s debt spree forces banks to hedge their counterparty exposure
Libor reform threatens hedge accounting for loans
Changes to loan terms may nullify contracts and create balance sheet volatility
Five US banks had fewest down days since 2015 in Q1
BofA Securities, BNY Mellon, Citi, JP Morgan and Wells Fargo had most 'up' days in four years
The implicit constraints of Fundamental Review of the Trading Book profit-and-loss-attribution testing and a possible alternative framework
This paper presents the constraints embedded in the the profit-and-loss-attribution test and explores a possible alternative framework.