Risk magazine - Apr 2024
In this issue: Quants kick hornets’ nest, toxic flows reshaping Treasuries lending, the return of LockBit, and much more
Cover detail: Susanne Herbold, Starseed
Acrylic, oil pastel, coal on canvas, 140 x 140cm
Contact: Anne-Marie Bainbridge,
www.anne-mariebainbridge.co.uk
Articles in this issue
Quants are using language models to map what causes what
GPT-4 does a surprisingly good job of separating causation from correlation
Options market still searching for cause of the Vix plunge
BIS paper blames yield-enhancing structured products, but market participants are unconvinced
Robinhood buys Marex FCM as futures entry takes shape
Retail broking giant follows WeBull into futures market
Reluctantly, CME moves to clear US Treasuries
CME Group will seek regulatory approval to clear US Treasuries, chief executive Terry Duffy said today
Iosco gears up for ‘intensive work’ on AI regulation
Watchdogs risk ‘falling behind the curve’, secretary-general warns; FSB also working on guidance
As FCMs dwindle, regulators fear systemic risk
Panellists highlight dangers of clearing membership becoming more concentrated
BGC forming consortium to take on CME Group’s rates empire
Banks and PTFs are being offered a stake in FMX, which has CFTC approval to launch a futures exchange
Traders eye negative CDS-bond basis
Changed market dynamic can be profitable for those firms able to capture it
Turbocharging tech for next-level risk analytics
As regulatory demands and market conditions constantly change, investing in robust risk analytics is becoming not only a business necessity, but an essential compliance requirement
People: Citi snags Raghavan, SocGen bags Estrada, all change at NYCB, and more
Latest job changes across the industry
The quants who kicked the hornets’ nest – to champion causality
A small but influential cadre says the multi-trillion-dollar factor investing industry is based on flawed science
Snail race: the slow growth of securities lending CCPs
There’s underlying appetite to clear, but a structure to suit all participants is proving elusive
Too soon to say good riddance to banks’ public enemy number one
As LockBit plans its comeback, experts say banks need a clear ransomware negotiating playbook
Zero-day options: unique market dynamics and risk considerations
In a recent Risk.net webinar, experts discussed the growth and usage of 0DTE options, challenges in modelling their prices and risks, practical risk management issues and whether they pose systemic risks to the market.
The race to build hyper-personalised investing
Direct indexing is taking off, but how far can it scale?
Foreign buyers jolt e-trading in Japan government bonds
Platforms report rise in small-ticket volumes, but bigger trades remain on voice
Deposit insurance could transform outlook for China TLAC
Issuance needs drop dramatically if regulators allow maximum inclusion of deposit insurance fund
Energy credit optimisers vie to become headline act
Competing initiatives may dilute ‘network effect’ as race to fill void left by TP Icap intensifies
Capital One puts OCC’s tough stance on mergers to the test
Proposed Discover deal should be approved but will go under the microscope, ex-regulators say
Bank credit risk: how well do you know your counterparties?
As financial markets evolve, evaluating the complex credit risk exposures of non-bank counterparties is crucial for effective risk management, says Quantifi’s Dmitry Pugachevsky
Canada’s FRTB pioneers get snowed on fund-linked trades
As Basel capital reforms go live, risk managers eye early adopters’ progress and push to improve capital treatment of fund-linked products
Harsh judgements: why Stateside lenders are upping the Q-factor
As CRE stalls, qualitative adjustments are forming a larger part of US banks’ credit risk allowances
The bank quant who wants to stop GenAI hallucinating
Wells Fargo model risk chief thinks he has found a way to validate large language models
Inside BGC’s quiet move into agency broking
The interdealer broker’s Caventor Capital arm is pitching a hands-on service for hedge funds, filling what it sees as a gap left by large banks
Derivatives funding: smart solutions for a complex environment
Eurex’s cleared repo and GC Pooling offerings are helping market participants overcome challenges in the funding, financing and collateral markets
BofA, Citi, JPM slash $18trn of derivatives in latest window dressing effort
Systemic indicator reduction in Q4 keeps lid on trio’s capital surcharges
Five US banks hit record leverage exposures
Ballooning balance sheets leave Goldman, Morgan Stanley with razor-thin SLR buffers
Canadian banks’ market RWAs spike on FRTB switch
CIBC, TD Bank and Scotia saw end-January charges jump amid overall ditching of internal models at Canada’s big five
Six US G-Sibs face higher surcharges under Fed’s proposals
Goldman and BNY Mellon only top banks to escape increase, analysis shows
Record rise in concentration at top CCPs leads to all-time high
Median top-five member open position concentration rises 2.4pp in Q4
Filling gaps in market data with optimal transport
Julius Baer quant proposes novel way to generate accurate prices for illiquid maturities
Volatility shape-shifters: arbitrage-free shaping of implied volatility surfaces
Manipulating implied volatility surfaces using optimal transport theory has several applications
Infrequent MtM reduces neither value-at-risk nor backtesting exceptions
Frequency of repricing impacts volatility and correlation measures
