Volatility
Enhanced expected impact cost model under abnormally high volatility
The authors extend their impact cost model beyond the typical factors to address the larger transaction costs brought on by stock market crowding effects in times of market turbulence.
Strong dollar pushes ANZ’s CVA charges up 57%
Risk-weighted assets rose A$1.4 billion in three months; biggest quarterly increase since mid-2019
Crédit Agricole VAR hits highest since 2010
Trading risk gauge rose as high as €27 million during Q3
Who blew up gas prices? (It wasn’t just Russia)
Government buying, climate risk and short squeezes may have led to ‘horrendous’ gas market margin calls
Erste, RBI top up provisions with €258m in overlays
Austrian lenders remain reliant on model supplements as energy squeeze looms
Vol pushed HSBC’s modelled market risk up 37% in Q3
Erratic markets in Europe and Asia blamed for $6.4bn increase led by VAR and SVAR-based charges
NatWest’s modelled market RWAs up 10% on RNIV backstop
Bank sees higher charges while it reworks VAR engine
Forecasting the realized volatility of stock markets with financial stress
This paper investigates the impact of financial stress on the predictability of the realized volatility of five stock markets
Corporates rush to hedge emerging market currency risks
Falling forward points have reduced cost of hedging further drops in Chinese renminbi
BNY, State Street took $6.5bn fair-value hit to bonds in Q3
Eroding prices of RMBSs and govies keep widening unrealised losses
Sculpting implied volatility surfaces of illiquid assets
From the stock cumulative distribution function an arbitrage-free volatility surface is derived
Morgan Stanley’s VAR averaged $61m in Q3
Trading risk indicator surged 33%, second-hottest reading since 2013
‘Perfect’ VKO trades knock the smile off vol
Dealer hedging of options which profit from ‘spot down, vol down’ may have amplified rare dynamic
Fragile liquidity puts markets in ‘danger zone’
Some measures of trading conditions are as poor as in 2008
Market risk capital relief could cut charges at 13 EU banks
EBA says Covid-style measures could be considered to tackle energy crisis
Esma renews Mifid pursuit of energy firms amid crisis
Utility companies worry about high and volatile capital requirements if they are caught under IFR
BoJ action to strengthen yen spurs FX options traders
Traders turn bearish on USD/JPY FX vol over further central bank intervention
BoE intervention whipsaws pension funds that dumped hedges
Unhedged funds saw liabilities rise by up to 20% when rates pulled back
$899m margin breach at FICC’s mortgage unit
Three-day move in TBA prices on June 9 triggered second-highest backtesting deficiency to date
Talking Heads 2022: Rates market ruckus
Inaugural interview series looks at how sell-side traders are adapting to a world of surging inflation and rates
Multilevel Monte Carlo simulation for VIX options in the rough Bergomi model
The authors consider the pricing of the Chicago Board options Exchange VIX, demonstrating experiments highlighting the efficiency of a multilevel approach in pricing of VIX options.
FICC’s government securities unit hit by $995m breach
Large moves in US Treasury yields in June to blame for largest backtesting exception on record
Eurex liquidity pool jumps 39% as required IM rises
Members of the IRS clearing unit saw the largest increase of required margin in Q2
StanChart tackles US-China rates divergence
Talking Heads 2022: Policy changes have upended correlations in emerging markets, says rates head Lettich