Hedging
HSBC’s rate-hedge reset to generate $1bn bond loss
Unwind of lower-yielding bonds costs $578m in Q3, with another $400m expected by year-end
Hedging of financial derivative contracts via Monte Carlo tree search
This paper applies the Monte Carlo tree search as a method for replication in the presence of risk and market friction
US banks ditch IR futures as appetite for swaps booms
Notional for futures craters 19% in Q2, hitting lowest in at least seven years
RBC’s credit derivatives book grows fourfold on market-making push
Notionals of credit protection sold and purchased have ballooned 236% and 382% respectively since October 2022
Asset managers offer tailored LDI to smaller pension schemes
Minimum AUM for customised hedging slashed from around £400m to £75m
Europe’s lenders sail into uncharted waters of the banking book
Regulators are pushing banks to map their credit spread risk. Here be dragons?
How Chenavari is adapting to an uncertain macro regime
Talking Heads 2023: Fund chief Loic Fery eyes rebalancing between public and private credit strategies
Rate of cleared OTC derivatives rises at European banks
Swedbank leads dealers in secular trend towards clearing space
We need to talk about pre-hedging
Dealers claim it’s a vital tool for managing risk. Clients say it’s open to abuse. How should regulators treat the problem child of financial markets?
Iosco takes aim at pre-hedging with new probe
Global standard-setter intends to release results of review in third quarter of 2024
HKEX eyes options contracts on MSCI A-shares index
Warrant issuers could benefit from roll-out of additional hedging instruments
Podcast: Julien Guyon on volatility modelling and World Cup draws
Academic discusses option pricing, path-dependent volatility and tackling FIFA’s statistical bias
Man on a mission: Axel van Nederveen, swaps evangelist
EBRD treasurer spreads the good word about local currency derivatives markets
Derivatives valuation swings lop $2.4bn off BofA’s income in Q2
DVAs and markdowns on fair-value hedges return to drag on dealer’s revenue
Trading risks and a spotlight on XVA
Panellists at Risk Live Europe 2023 discussed the usefulness, limitations and outlook for valuation adjustments
US G-Sibs’ OTC derivatives hit record $243 trillion
JP Morgan leads US dealers in boosting notional amounts during volatile first quarter
BNP Paribas, SocGen brace for more hits from TLTRO hedge unwinds
Duo expect combined €600m in losses after already booking €500m in first quarter
Japan autocall curbs upend Nikkei vol
Lack of reinvestment alongside FSA review forces scramble to buy back hedges as products knock out
Dutch pensions have extra year to restructure hedges
January 2028 implementation date allows more time for long-dated swaps to roll off
Information geometry of risks and returns
An innovative product design framework and its geometric interpretation is introduced
Regional banks face soaring term SOFR spreads
Bid/offers hit 10bp as dealers price counterparty risk into non-cleared Libor transition trades
SVB salvage lands First Citizens with $18bn of FX contracts
Bank now holds seventh-largest stack of non-trading currency derivatives in the US
Europe’s new IRRBB test: the riddle with no answer
A proposed compromise on net interest income test is not scientific, but exact calibration may be impossible
Easing of trading curbs is no quick fix for term SOFR swaps
ARRC’s new guidelines will do little to improve liquidity, but may keep a lid on spiralling basis