Risk magazine - Sep 2024
Cover detail:
Bea Schubert, Flying Home No.8
Mixed media on canvas, 38 x 46 cm,
www.anne-mariebainbridge.co.uk
am.b@btopenworld.com
Articles in this issue
Are regulators wrong to think of AT1s as debt?
Bank capital bonds face criticism. One answer might be to treat them as ‘fixed-income equity’
Fed’s Basel III rollback gives clearing units a capital break
Client-cleared trades will be exempt from CVA charges and G-Sib surcharge calculations, says Barr
Pricing and funding woes hit gilt repo
QT-driven funding cost rises combined with clients’ price demands see at least two banks pull back
EU banks fear loss of NSFR repo relief
European Commission must decide by next June; other jurisdictions adopted softer calibration
Supervisors use generative AI to tame ‘chaotic’ data
Officials merge credit databases with unstructured reports to sharpen bank oversight, explains Banco de España ex-deputy
DTCC ‘will prevail’ in UST clearing, says CME’s Duffy
CME boss says LCH-FMX cross-margining deal could face obstacles, and acknowledges difficulties at BrokerTec
Fed’s new liquidity rule spells more pain for regional banks
Limit on HTM assets follows move to deduct unrealised losses from capital buffers
Jane Street ups its game in FX market-making
High-frequency trading firm now streaming bilateral spot FX liquidity to clients
People: Masters moves into FNZ, Two Sigma founders step back, and more
Latest job changes across the industry
Banks must close the loop on counterparty credit risk
Following a series of market and industry credit risk events, regulatory scrutiny of counterparty credit risk management practices is increasing. Now, more than ever, banks must ensure they are optimising their approaches to credit risk mitigation
Regulators want to fix AT1s. Investors want restraint
Tweaking the instrument that regulators love to hate may be the only way to prevent its abolition
Risk management overhauls juggle speed and independence
Some banks say the 1.5 line of defence responds faster to risk, but supervisors are still divided
Should banks risk lightning hitting twice for CrowdStrike?
Bank tech teams divided on whether to give security vendor a second chance after update crash
Recent volatility highlights tech’s vital role in fixed income pricing
MarketAxess’ Julien Alexandre discusses how cutting-edge technology is transforming pricing and execution in the fixed income market amid periodic bouts of volatility
Ruled out: can regulators settle the pre-hedging debate?
Market participants are at odds over the practice and whether regulation or principles can settle the score
The post-Archegos risk model rebuild begins… slowly
Following regulatory prodding, banks start to overhaul counterparty risk models. A flurry of new research on the topic may aid the effort
Endgame manoeuvre: US banks put SLR reform back in spotlight
Plan to ease Basel III brings renewed focus to impact of leverage ratio on US Treasury market
Could Trump presidency herald $27bn margin call on World Bank?
Think-tank’s policy plan to pull US out of multilateral threatens AAA rating, ending collateral exemption
TwentyFour’s ABS chief on skirting ‘overbaked’ deals as issuance booms
Some new issuers are pricing tighter than is sensible, says Aza Teeuwen
Finland’s Ilmarinen goes back to basics
Talking Heads: Once one of the few funds that would enter bank risk recycling trades, recent overcrowding has seen it pivot to listed equities
Supply chain decoupling fires up alpha focus at BofA
Talking Heads: Stock dispersion sees funds gross up on long/short baskets, while US structured notes come of age
Let’s grow the third-party risk playbook – CME security chief
CrowdStrike outage highlights need for financial sector to adjust its game plan
FX data champion outlines transparency push
Stuart Simmons, new head of GFXC working group, wants trading platforms to come clean on how they use client data
Derivatives pricing with AI: faster, better, cheaper
Pascal Tremoureux, head of quantitative research at Murex, describes the firm’s mission to replicate derivatives pricing models through machine learning – slashing time and costs in the process
Brooklyn’s robot analyst cuts costs by four-fifths
In tests, direct indexer’s model picks portfolios for review with near-perfect accuracy
Only human: the secret of reliable LLM workflows
This article explores the research behind a recent Risk Live Europe session, examining the strengths and limitations of LLMs and offering insights on how to effectively integrate them into business workflows
Fourteen US banks poised to benefit from curtailed market risk rule
Fed’s changes to Basel III endgame proposal would keep regional banks with limited trading activity exempt from costly FRTB requirements
Estimated stress losses at CME, Eurex and LCH surge to record high
Latest projections likely behind increases in contributions to CCPs’ default funds in Q2
Deutsche curbs CVA charges to record low
Addition of hedges in Q2 helps cut RWAs by 26%, outpacing other European banks
FICC captures record share of US MMF repos
Fed facility sees continued outflows as funds redirect assets
IM and default funds drive big variance in EU bank CCP exposures
BNP Paribas accounts for 55% of top dealers’ €126 billion exposures
BofA quants propose new model for when to hold, when to sell
Closed-form formula helps market-makers optimise exit strategies
A hard exit threshold strategy for market-makers
A closed-form solution to derive optimal stop-loss and profit-taking levels is presented
Backtesting correlated quantities
A technique to decorrelate samples and reach higher discriminatory power is presented
