Interest rates
Getting a handle on model parameters
Mean reversion in rate parameters opens the door to dimensionality reduction
Estimating mean reversions in interest rate models
The speed of factors’ mean reversion in rate models is estimated
Podcast: adventures in autoencoding
Trio of senior quants explain how autoencoders can reduce dimensionality in yield curves
Hedge funds flock to hybrids to trade macro uncertainty
Firms repurpose structure made popular by Trump trades last year
Surging gross repo costs highlight US dealers’ divergence on netting
Lack of offsetting in GAAP presentation leads BNY and Northern Trust to report paying double- or triple-digit rates on fed funds, repos
JSCC, DTCC government bond units see default funds surge
Member contributions hit multi-year highs in Q4
Auto-encoding term-structure models
An arbitrage-free low-dimensionality interest rate model is presented
High CNH rates curb appetite for Hong Kong’s new repo scheme
Dealers remain hopeful initiative is a prelude to full onshore repo market access
US banks tiptoe back to least liquid assets for HQLAs
Goldman and Wells Fargo drive rebound on Level 2A holdings after two-year retreat
‘Trump slump’ hedges rise on rate cut fears
One dealer notes fivefold increase in number of clients hedging against possibility of faster rate cuts
Market knee-jerks keep VAR models on their toes
With a return to volatility, increased backtesting exceptions show banks’ algos are stretched
Positive M&A outlook could boost deal contingent hedges
Traders predict hedging activity linked to deal completions will take off this year
Eurex squashes butterflies with Stir incentives
Rebate caps on low-risk strategies flatten mid-curve bulge in €STR contracts
Japan Post Bank’s liquid deposits reach largest ever share
A decade since its privatisation, the bank has seen a shift in its deposit structure
US banks’ unrealised losses surge by $33bn in Q4
Led by JPM, Wells Fargo and Capital One, every major bank reported higher losses in AOCI, in reversal of previous quarter’s recovery
Clients’ share of IRS clearing margin hit record high
Data from CME, Eurex and LCH shows clearing members’ house IM fell in January, pushing client proportion to 67.7%
Hong Kong dealers make Honia transition push
Standard Chartered ramps up swaps quoting for Hibor alternative; calls for industry transition group
Legal battle over Italian swaps drags on, frustrating dealers
Despite banks claiming victory in London over disputed interest rate swaps, parallel Italian proceedings could delay payouts
JP Morgan logs two VAR breaches as trading revenue slumps
Largest trading loss in Q4 reached 262% of the bank’s VAR limit, matching a breach reported at the height of the Covid-19 pandemic
Japanese banks’ bond strategies diverge amid interest rate shifts
MUFG increases JGB portfolio duration to four-year high, while SMFG and SMTG take opposite bet
Corporates turn to structured notes to juice cash returns
Dual currency notes find favour with treasurers under pressure to boost yields amid higher rates