Risk magazine - Jul 2017
Your July issue highlights include: how regulators have missed the point in year-long tussle over Basel model limits; why the price is still wrong when it comes to swaps valuation; Russia’s shock €1bn ruling over Sberbank case; and why volatility hedgers are waking up to gamma.
Articles in this issue
Focus on Basel output floor calibration misses the point
Until all the final standardised approaches are known, the floor has little meaning
Crapo: US Treasury reforms will be ‘complicated’
Democrats unlikely to back changes that benefit big banks, Senate banking committee chair says
US Treasury stance on CCAR a return to ‘bad old days’
Overhaul would kill test failed by eight banks in past three years
US Treasury’s leverage fix tipped to boost repo market
US Treasury plan to exempt US government bond exposures expected to help struggling market
Banks turn to synthetic derivatives to cut initial margin
Options-based instruments can halve initial margin for some non-cleared products, say dealers
Fed weighing VM capital cut for cleared swaps
Powell implies support for practice that saved UBS $300m in capital
DTCC’s $74 billion liquidity charge riles members
Some firms may stop clearing US Treasury trades if the CCLF is implemented
Three lines of defence model still evolving, say practitioners
Clearer split in responsibilities between first and second lines needed, say op risk chiefs
Basel capital floor faces credit risk eclipse
Impact of capital floor depends on new credit risk rules and changes to treatment of provisions
Russian central bank slams ruling in $1bn Sberbank swaps case
Lawyers say shock court judgement in ruble options dispute “puts hundreds of contracts at risk”
Volatility hedgers turn to gamma trades to stem slow ‘bleed’
Nearly $80 billion of gamma trades initiated in March and April as long vega strategies fare badly
Banks tap equities and FX staff for fixed-income fizz
BAML, HSBC, RBC, StanChart among banks transferring e-trading know-how
The price is still wrong: banks tackle bond CSA discounting
Diverging Eonia and European repo rates spur banks to look at valuations of swaps with bond collateral
U-turn on SMA comparability sparks anger
Three regulators echo bank dismay as key principle of op risk capital framework is abandoned
Op risk managers not sold on SMA alternative
Proposed forward-looking approach would permit internal modelling, but penalise banks if losses exceed estimates
‘Boiling the ocean’: GDPR data demands overwhelm banks
Repapering of existing contracts could stretch beyond May 2018, forcing dealers to rely on regulatory forbearance
Scrap the gold plate: Mnuchin goes global on bank rules
Treasury converges to international standards, but leverage ratio exception may delay Basel deal
Benchmark fallbacks should be regulated, says industry
Fears of basis risk unless all users are obliged to write backup rates into legacy contracts
Insurance accounting shake-up puts risk centre stage
IFRS 17 will create a closer link between insurers' risk management and P&L volatility
Insurers press case for new-look risk margin
Firms call for lower cost of capital and link to interest rates in key element of Solvency II
Energy firms raise concerns over CFTC capital rules
Commercial swap dealers might not qualify for a treatment designed specifically for them
Monthly credit data review: PDs imply Brexit stress
Default risk for group of UK corporates has risen 11% over the past year
Monthly swaps data review: a day in the life of a swap
As US rate-setters met last month, real-time reporting showed the impact on swaps
All MVA needs is a first-mover
Fair value adjustment for initial margin should be reflected in accounting statement
Trading lightly: cross-impact and optimal portfolio execution
A liquidity model for basket of correlated securities is presented
Accounting for initial margin under IFRS 13
Chris Kenyon and Richard Kenyon show why initial margin should be part of the fair value of a derivative
Why Robert Almgren no longer trades using Almgren-Chriss
Co-author of popular model says market nuances are critical in optimal execution
