Risk magazine - Jul 2024
In this collection: Doomed FRTB models, CFTC cracks, IRRBB bother, and lots more
Articles in this issue
Attention shifts to US, UK after European Union postpones FRTB
Risk Live: Global timeline still unclear, with banks hoping lawmakers will use delay to soften rules
Deutsche Bank’s seven lead use cases for GenAI
Risk Live: Innovation head sees “multi-multi-million benefit” in AI documentation and email tools
Loss of diversification benefits ‘will drive higher FRTB charges’
Independent study backs industry’s claims of significant rise in market risk capital requirements
Capital rules explain leverage craving in US bank risk transfers
Tougher requirements have led to conservative structuring and lower coupons
Regulators urged to back non-cash variation margin
Market participants warn FSB on cash demands if banks curb collateral upgrade trades
US Fed reveals its five use cases for generative AI
Internal sandbox used to assess viability and risks; coding and content generation on the agenda
OCC readies new intraday margin requirement
Draft measure would cover all options positions including 0DTEs
Trends, challenges and opportunities in fixed income trading
Is 2024 the year of the bond?
Why FRTB models are on the edge of extinction
With only four banks known to be applying to use internal models for market risk, the fate of advanced modelling looks precarious
Model teams fear budget cuts as FRTB wipeout looms
Senior modellers think supervisory intervention is needed to prevent funding drought
Breaking with Behnam: inside the dysfunction at the CFTC
Policy and personality clashes have left the chairman isolated and slowed rulemaking activity to a crawl
Shocks to the system: how Basel IRRBB update affects new EU test
Disclosures suggest more banks will be classified as outliers on net interest income assessment
The coming AI revolution in QIS
The first machine learning-based equity indexes launched in 2019. They are finally gaining traction with investors
Drilling for default: dry run gives CCPs a Lehman-like lesson
Member default simulation finds standardisation and porting could help in a crisis, and moots unscheduled repeat drill
US banks seek to open vendors’ black box on green data
Inaugural Fed climate scenario analysis flags lack of transparency around third-party models
How steepener trades burned hedge funds, and what happened next
Delays to central bank rate cuts torpedo popular trade, causing funds to pull capital – to the chagrin of sell-side desks
House of cards? The $3 trillion (non-systemic) real estate risk
Regional banks share the bulk of US commercial real estate exposure, but the sector’s downturn doesn’t faze them
Keys to the kingdom: FX dealers open doors to passive trades
Banks provide entry to internal exchanges and principal trading desks
The (slow) road to capital-backed investing for pensions
Partnerships with hedge funds and private equity firms promise a quicker route to funded status. So why have deals stalled?
Go your own way: departures pose new challenges for CFTC
Loss of Democratic majority would impede chairman’s ambitions for regulatory agenda
New data techniques to turbocharge risk management
Risk management and data management have become central to the broader digitalisation efforts of financial institutions. A robust data strategy has an important role in supporting and enhancing risk management efforts
Model risk mitigation for pricing services: from the model owner’s lens
Financial markets rely heavily on quantitative models for decision-making, making effective model risk management crucial. Attika Raj, senior specialist, complex securities pricing at LSEG Data & Analytics, emphasises the importance of the first line of…
How Argentina’s financial tango could become a dance of death
Central bank and government’s unholy alliance is storing up further trouble for economy
Decoding the decoupling in US and eurozone inflation
ECB rates cut and Fed’s refusal to follow suit point to differing fundamentals in stateside and EU economies
Covid-induced Eurobonds mark step towards EU financial cohesion
Successful issuance points to greater pan-European sharing of risk
Banks must break data silos to improve pricing decisions
Data consistency is increasingly key to judging risk and reacting quickly in a crisis, writes former XVA practitioner
Modernising compliance functions with regtech
Regtech addresses the complexities of regulatory requirements, offering innovative tools to modernise compliance functions, streamline processes and enhance efficiency. This article explores its role in compliance and reporting within the banking sector,…
RBC’s CVA capital charge up 22% since FRTB adoption
Bank eschewed revised standardised approach in favour of simpler yet constraining formulas
Liquidity risk hits five-year high at LCH
Higher settlement obligations at Paris-based RepoClear blamed for €9bn spike
JP Morgan SE allocates €318m for structural credit spread risk
Bank’s EU arm among first to disclose figure following EBA’s diktat on more granular monitoring of CSRBB
LCH suffered nearly 13 hours of op failures in Q1
Longest downtime since 2019 in breach of CCP’s two-hour recovery objective
Credit Suisse USA posts trading loss for 288% of VAR
Swiss bank’s subsidiary one of only three US dealers to incur backtesting exception in Q1
Podcast: Lorenzo Ravagli on why the skew is for the many
JP Morgan quant proposes a unified framework for trading the volatility skew premium
Harvesting the FX skew premium
Observing the vol-of-vol parameter may reveal a skew premium in FX markets
Weighting for leverage
A credit exposure model for leveraged collateralised counterparties is presented
