Default risk
Reducing margin procyclicality at central counterparties
This paper studies the effect of less procyclical margin models on cleared volumes and risk taking in a stylized CCP.
If CLO investors flee, defaults could snowball
High yield borrowers relying on a steady stream of leveraged loan issuance that could quickly run dry
CLO scare: could rated tranches see losses?
Structures are more solid, but loans are dicier, and recovery rates may be disintegrating
Banks demand greater scrutiny of CCP margin add-ons
Nasdaq Clearing blow-up prompts questions over CCPs’ methods of applying top-ups to concentrated positions
Eurex default fund swells to €4.5 billion
Second quarter saw the second-largest quarterly increase since the CCP began reporting in 2015
Lessons from two commodity defaults
Regulators and exchanges need to learn from the Greenhat/PJM and Norwegian Nasdaq defaults
Improved credit loss estimates proposed for IFRS 9
New smoothing technique claims to overcome flaws in risk rating scales
JP exec calls for derivatives margin changes
Move follows 13 significant margin breaches in 2018, with one breaching by as much as 245%
EU banks slash default risk estimates for corporates by 30%
Probabilities of default fall on average across 39 countries
OCC swells liquidity after reinforcing clearing fund
Further changes expected following September clearing fund revamp
Credit data: Trump tax cuts have not hurt US states
Tax package is double-edged sword for US states, but credit has strengthened over past year
Banks see higher FDIC charges lasting through 2018
Levy adds millions to dealers' expenses
Forecasting corporate defaults in the German stock market
In this paper, the authors estimate and test several default risk models using new and unique data on corporate defaults in the German stock market.
JSCC reinforces default funds
Member firm contributions swell ¥135.5 billion across derivatives clearing services
Climate risk joins ethics in driving lending decisions
Barclays, BNP Paribas and others are analysing risk of climate change-related losses
CCP stress tests need improvement, argues new research
Existing data could inform greater number of stress scenarios and create system-wide test
Credit default prediction using a support vector machine and a probabilistic neural network
In this study, the authors address the fact that the ranking of classifiers varies for different criteria with measures under different circumstances, by proposing the simultaneous application of support vector machine and probabilistic neural network …
Credit data: firms with fewer well-paid women are riskier
Gender pay gap disclosures could be a proxy for credit risk, writes David Carruthers of Credit Benchmark
A floored plan: Europe’s CCP recovery rules draw fire
CCPs and clearing members both unhappy with proposed allocation of non-default losses
Model risk in the Fundamental Review of the Trading Book: the case of the Default Risk Charge
This paper assesses the model risk associated with the copula choice for the calculation of the Default Risk Charge (DRC) measure.
Risk mutualization and financial stability: recovering and resolving a central counterparty
This paper investigates how financial market participants respond to risk mutualization implemented by a CCP using assessments after a large credit loss.
Credit data: Brexit gloom lifting for UK companies?
David Carruthers of Credit Benchmark looks at the most recent trends in bank-sourced credit data
Exchanges and FCMs clash over bitcoin clearing carve-out
Market participants say CME, CBOE should clear bitcoin futures separately
Issuer bias in corporate ratings toward financially constrained firms
This paper considers whether the rating agency attempts to mitigate the feedback effect through its rating actions. Using Moody’s issuer ratings over 1982–2009, the paper shows that firms with greater external financing constraints are less likely to be…