Counterparty credit risk
Banks still face risk of Fed disapproval on exposure limits
Rules loosened on affiliated counterparties, but supervisor can reject banks’ findings
UBS far exceeds 2018 credit and counterparty risk estimate
Sfr2.4 billion growth attributed to model changes alone
UK banks ramp up market risk
Market RWAs up £18 billion in first quarter
BAML replaces head of global rates
Gupta and Stanley named co-heads as Roberts exits
Model and policy changes behind billions in UK bank RWA shifts
Net capital charges of £368 million across five lenders attributable to model updates alone
US CVA charges over seven times higher than EU
Huge disparity appears to result from EU exemption for corporate trades
EU parliament’s moratorium plan billed ‘recipe for bank run’
Proposal allows pre-resolution stay as well as one during resolution provided bank reopens in between
JP Morgan counterparty credit risk grows
Risk-weighted assets consumed by least-risky counterparties decline from 57% to 36% in two years
Fed, Goldman: wide use of SA-CCR creates problems
Isda AGM: Fed plans quick implementation, while Goldman urges caution on extending use
Softened EU swap stay still threatens margin hike
Moratorium cut to two days, but pre-resolution stay could make EU a non-netting jurisdiction
A copula approach to credit valuation adjustment for swaps under wrong-way risk
This paper deals with the credit valuation adjustment (CVA) of interest rate swap (IRS) contracts in the presence of an adverse dependence between the default time and interest rates: so-called wrong-way risk (WWR).
Initial margin with risky collateral
This paper explores the complication of calculating the IM amount requirement when collateral comprises risky assets in a parametric VaR framework. The authors show that the required IM amount can be calculated by solving a quadratic inequality.
Asia clearing surge raises concerns over eligible collateral
Scarcity of high-quality liquid assets gives rise to liquidity risk worries, say banks
Calibrating Heston for credit risk
Marco de Innocentis and Sergei Levendorskiĭ describe a faster and more accurate method for market-implied calibration of the Heston model
Capital savings from new IM regime elude dealers
Slow model development and approval processes mean banks yet to see benefits expected under margin rules
In a bind: how CCAR constrains US bank strategy
Fed’s stress tests are forcing banks to cut loan portfolios and trading assets
Bailout obsession holds back US CCP resolution regime
Dodd-Frank leaves legal uncertainty, but proposed alternatives could be even worse
Basel capital floor faces credit risk eclipse
Impact of capital floor depends on new credit risk rules and changes to treatment of provisions
Time trial: the big risks that lurk in OTC margin gaps
Banks take aim at margin and trade-flow lag that can cause 95% of counterparty risk
EBA shelves CVA charge plans after twin defeats
Ongoing rule changes at Basel and EU could allow future bid to end corporate exemption
Derivatives start-up aims to cut costs at margin hub
Ex-Morgan Stanley bankers’ offering aims to reduce daily collateral flows that currently top $200bn