Hedging
Shocks to the system: how Basel IRRBB update affects new EU test
Disclosures suggest more banks will be classified as outliers on net interest income assessment
RBC’s CVA capital charge up 22% since FRTB adoption
Bank eschewed revised standardised approach in favour of simpler yet constraining formulas
Banks, vendors mine AI for corporate FX hedging
New machine learning algos can help corporate clients adjust hedging ratios, but tech’s effectiveness is limited by data quality, experts caution
FX books bulge in quant investment field
Carry strategies attract bulk of interest; banks eye growth in volatility, intraday and emerging market replication
Nervous UK pension schemes want liquidity fixes – it’ll cost them
Asset managers are crafting new ways for schemes to raise cash in a crisis
Softer FX rules for China QFIs set to boost CNY competition
Freedom to circumvent local custodians a plus for pricing and best execution – State Street
Natixis turns on the taps in flow trading
French bank boosts flow business, balancing structured solutions capabilities
Benchmark switch leaves hedging headache for Philippine banks
If interest rates are cut before new benchmark docs are ready, banks face possible NII squeeze
Market for ‘orphan’ hedges leaves some borrowers stranded
Companies with private credit loans face punitive costs from banks for often imperfect hedges
RMB vol returns as hedge funds take barrier trade profits
Unwinds of exotic positions saw vol jump 72% after surprise PBoC move last week
Brazil readies long-dated FX hedging scheme for green projects
Development bank IDB will lend its credit rating to unlock cheaper USD/BRL hedges out to 25 years
Clobbered: how ‘toxic’ flows reshaped US Treasury trading
Volumes have dropped by more than a third at BrokerTec. The reasons are complex, the outlook uncertain
How China’s equities intervention caused a quant fund quake
Popular leveraged market-neutral trade crumbled after government stepped in to support major indexes in February
TLTRO hedge unwinding bill tops €1.2bn at BNPP, SocGen
Exit from swaps tripped up by ECB’s tightening marred banks’ 2023 throughout
Digging deeper into deep hedging
Dynamic techniques and GenAI simulated data can push the limits of deep hedging even further, as derivatives guru John Hull and colleagues explain
FX losses mount after Argentina’s devaluation
Citi, Adidas among those taking hits totalling over $3.3bn in Q4 as dealers cite lack of hedging tools
Comerica takes $91m hit on BSBY discontinuation
Bank forced to re-designate $7bn of receive-fixed swaps as SOFR-referencing hedges
Basel’s cherry-picking toughens IRRBB shock scenarios
European banks want higher outlier thresholds to offset higher confidence level in new standard
Westpac fined over interest rate swap pre-hedging
Court finds against Australian bank for “unconscionable” behaviour, amid calls for a broader guidance around the practice
Anticipating Fed cuts, Huntington drops $15.5bn of pay-fixed swaptions
Bank terminates costly hedging strategy merely a quarter after upping notional values by a third
Joint S&P 500/VIX smile calibration in discrete and continuous time
An arbitrage-free model for exotic options that captures smiles and futures is presented
Undeterred, hedge funds bet on euro swap steepeners
Expected rate cuts and pension reforms are driving steepener flows, but large pension funds may not be finished hedging at the long end
Uncertain rates outlook poses challenge for corporate FX hedgers
Hedging programmes may need a revamp as EM/G10 rates differentials narrow
Citi propels G-Sibs’ OTC derivatives notionals to nine-year high
Bank leapfrogged Goldman as fourth-largest derivatives dealer after 20% jump over 2022