Backtesting
Market knee-jerks keep VAR models on their toes
With a return to volatility, increased backtesting exceptions show banks’ algos are stretched
Dissecting initial margin forecasts: models, limitations and backtesting
The authors demonstrate that initial margin is not value-at-risk, but its approximation, and suggest a generic backtesting and verification framework that accommodates both forecasting limitations and existing models.
Goldman chalks up highest VAR breach since pandemic
Nine breaches in total across 34 banks in Q3
UBS logs three VAR breaches on legacy Credit Suisse positions
Bank risks higher capital charges amid market volatility and exit-related costs
Podcast: Piterbarg and Nowaczyk on running better backtests
Quants discuss new way to extract independent samples from correlated datasets
Backtesting correlated quantities
A technique to decorrelate samples and reach higher discriminatory power is presented
Kernel-based estimation of spectral risk measures
The authors put forward a kernel-based estimator for spectral risk measures and compare its performance with existing SRM estimators.
Model teams fear budget cuts as FRTB wipeout looms
Senior modellers think supervisory intervention is needed to prevent funding drought
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
Infrequent MtM reduces neither value-at-risk nor backtesting exceptions
Frequency of repricing impacts volatility and correlation measures
Credit Suisse USA rounds 2023 with fifth VAR breach
Wall Street unit’s capital multiplier ratchets back up to 3.4x
Citi, JP Morgan incurred record VAR overshoots in Q4
Peak single-day losses rank among worst for US banks post-pandemic
Rabobank cuts back on ECL overlays
Improved backtesting performance reduces add-ons to allowances to lowest in five years
FRTB could put Indian banks at competitive disadvantage
Simplified approach could leave local banks with higher capital charges than foreign branches
NSCC had top margin breach of $1.2bn in Q3
Margin shortfall is largest on record for the CCP and bucks wider trend across global clearing houses
EBA seeks to tighten up uneven prudent value adjustments
Regulator to consult ‘soon’ on changes to improve consistency of capital deductions
Assessing the potential profitability of automated power market trading using event signals sourced from grid frequency data
The authors put forward a profitable trading strategy based on power grid events, demonstrating that minimized reaction times can increase profits.
VAR breaches trip up Citi, CS USA and two others in Q3
Comerica’s VAR multiplier ratchets up while Huntington’s remains at record high
Party’s over as more banks drop internal models for market risk
At least three systemic banks in Europe intend to ditch IMA for capital requirements
AgBank’s regulatory VAR hits record high in first half
Chinese bank’s market risk up by over a third to highest level in a decade
US-regulated IHCs retrench from VAR limits
Largest daily trading losses in Q2 were on average 50% of forecast, down from 102% in Q1