Backtesting
US banks’ VAR breaches up 2.5x in 2022
‘Hypothetical’ one-day losses exceeded VAR on 55 occasions, as losing trading days prevail
Value-at-risk and the global financial crisis
The authors investigate the forecasting ability of bank VaR estimates around the 2007-9 financial crisis using daily data from seven international banks, finding systemic overstating of VaR either side of the financial crisis and mixed performance during…
US banks’ loss-to-VAR ratios fell in Q3
Largest daily trading losses were on average 84% of forecast, compared with 105% in Q2
LCH’s fixed income and IRS units hit by record margin breaches
Peak breaches in Q3 were £924 million and £698 million in size, respectively
Fed hike behind $682m and $460m breaches at FICC
Clearing units for MBS and government securities hit by backtesting deficiencies on September 21
Semiparametric GARCH models with long memory applied to value-at-risk and expected shortfall
The authors introduce and apply new semiparametric GARCH models with long memory to obtain rolling one-step ahead forecasts for the value-at-risk and expected shortfall (ES) for market risk assets.
As interest rates surge, bankers fret over last year’s models
IRRBB modellers trying to predict client behaviour have little relevant data to fall back on
Market risk capital relief could cut charges at 13 EU banks
EBA says Covid-style measures could be considered to tackle energy crisis
$899m margin breach at FICC’s mortgage unit
Three-day move in TBA prices on June 9 triggered second-highest backtesting deficiency to date
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
Interest rate vol triggered three breaches at CME in Q2
CCP’s interest rate swaps clearing unit reported its first initial margin shortfalls since Q3 2020
JSCC’s bond and IRS units hit by almost 200 breaches
Q2 volatility triggered some of the largest initial margin breaches ever reported by the CCP
JP Morgan’s VAR multiplier increases following Q2 breach
Citi also reported one backtesting exception but kept VAR-based market risk capital requirement flat
Commerz’s VAR multiplier ratchets up after H1 breaches
Bank dodged increase in market RWAs by rebalancing to a lower-risk trading portfolio
PRA’s pot shots threaten Simm’s global ubiquity
UK regulator’s push to improve model governance could tip non-cleared derivatives market into chaos
Eurex’s fixed income and IRS units hit by almost 700 breaches
Peak breaches in Q1 were €706 million and €214 million in size, respectively
SwapClear incurs record number of margin breaches
LCH’s interest rate derivatives clearing service reported over 4,000 backtesting exceptions in Q1
Morgan Stanley incurs two VAR breaches
The latest backtesting exceptions put the bank one step closer to triggering a capital requirement hike
VAR multiplier hike sends UniCredit’s IMA charges up 23%
Market volatility following the invasion of Ukraine one of the drivers behind the increase
BNP Paribas notches three VAR breaches in Q1
Latest count puts bank on cusp of capital penalty
Fortunes of VAR: dealers decry effect of war on risk models
European banks with large Russian derivatives exposures face risk of backtesting exceptions – and higher capital requirements
NatWest’s market RWAs up 8% on higher VAR multiplier
Bank incurred regulatory backtesting exceptions amid heightened market volatility
Isda broadens FRTB carbon trading study to win over sceptics
New study shows risk weights too high for US markets, but data from 2008 still missing
EU banks racked up VAR breaches in 2021
Crédit Agricole and ING Bank hit with higher multipliers after exception count rises