Backtesting
Evaluation of backtesting techniques on risk models with different horizons
In this study different value-at-risk (VaR) models are analyzed under different estimation approaches (filtered historical simulation, extreme value theory and Monte Carlo simulation) and backtested with different techniques.
Bank of America, BNY Mellon incur VAR breaches
The second consecutive backtesting exception for the custodian bank brings it closer to a higher multiplier
Backtesting of a probability of default model in the point-in-time–through-the-cycle context
This paper presents a backtesting framework for a probability of default model, assuming that the latter is calibrated to both point-in-time and through-the-cycle levels.
Margining solution of the year: IHS Markit
Asia Risk Awards 2021
Quant funds tackle chronic overfitting in crypto strategies
Firms adapt backtests and tread lightly to address “huge” overfitting risk, magnified by scarce data
JP Morgan flirts with VAR limits
Largest trading loss in Q2 reached 96% of bank’s VAR limit
BNY Mellon incurred a VAR breach in Q2
The highest losses-to-VAR ratio was 145.75%, in the first backtesting exception reported by the bank since 2018
UBS incurred two VAR breaches in Q2
Risk Quantum understands the VAR backtesting exceptions stemmed from the Archegos blowout
US unit of BBVA on the brink of a VAR breach in Q1
Largest loss-to-VAR ratio at the firm was highest among the 12 intermediate holding companies
Morgan Stanley, Bank of America push VAR limits the most
Largest losses-to-VAR ratios at the two firms were the highest among the eight systemic US banks in Q1
Goldman’s market RWAs grew $14.9 billion in Q1
The increase was largely due to higher VAR and SVAR measures
Fake data can help backtesters, up to a point
Synthetic data made with machine learning will struggle to capture the caprice of financial markets
In fake data, quants see a fix for backtesting
Traditionally quants have learnt to pick data apart. Soon they might spend more time making it up
ECB’s Trim found 900 flaws with 31 banks’ market risk models
Remedying shortcomings added €11 billion to market RWAs in aggregate
Margin breaches quadrupled at Eurex in 2020
Equity derivatives service witnessed 1,782 breaches last year alone
The volatility paradigm that’s stirring up options pricing
‘Rough volatility’ models promise better pricing and hedging of options. But will they catch on?
Can CCPs zone in on improved margin buffers?
Dynamically adjusting margin add-ons could reduce cyclical funding demands
Data quality in focus as UMR deadlines stretch
The uncleared margin rules are seen by many as key to accurate and fast margin calculations. IHS Markit explores how firms can quickly assess proposed trades, calculate initial margin accurately and effectively handle the margin exchange workflow to…
Isda study reveals size of Covid’s trading book capital hike
Procyclicality led to aggregate 25% rise in market, CVA risk-weighted assets
The impact of data aggregation and risk attributes on stress testing models of mortgage default
In this paper, the authors investigate how data aggregation and risk attributes affect the development and performance of stress testing models by studying residential mortgage loan defaults.
Broken backtests leave quant researchers at a loss
As historical data loses relevance, quants must find new ways to validate their theories
Study suggests banks may be better off with simpler VAR models
Non-parametric VAR models perform well in calm markets, but miss the mark in volatile periods
Initial margin models of top CCPs slipped in Q1
Achieved coverage levels declined quarter-on-quarter
Margin breaches exceed €500m at Eurex in Q1
Eurex disclosed 3,180 margin shortfalls over twelve months to end-March