Whitepapers

As a recognised thought leader, Quantifi regularly publishes whitepaper and articles that offer valuable insight and sharing of best practices on key topics related to capital markets

 

January 2016

Basel III and Systemic Risk

Request a Copy

by Quantifi

One of the key shortcomings of the first two Basel Accords is that they approached the solvency of each institution independently. The recent crisis highlighted the additional ‘systemic’ risk that the failure of one large institution could cause the failure of one or more of its counterparties, which could trigger a chain reaction. Basel III addresses this issue in two ways. Firstly by significantly increasing capital buffers for risks related to the interconnectedness of the major dealers. Secondly by incentivising institutions to reduce counterparty risk through clearing and active management (hedging). Since Basel III may not explicitly state how some of the new provisions address systemic risk, some analysis is necessary.

Request a Copy

Managing Credit Risk by Counterparty Selection

Request a Copy

by Dmitry Pugachevsky, Quantifi

In cases where counterparties, e.g., prime brokers, do not post collateral and CDS protection is prohibitively expensive, hedge funds tend to manage credit risk through counterparty selection. This typically entails choosing the counterparty with the lowest aggregate current exposure (mark-to-market value) for the next OTC transaction. The problem with this approach is that it doesn’t take into account the potential level of current exposure on future dates. This whitepaper will step through an example where choosing a counterparty with lower current exposure can result in greater counterparty risk.

Request a Copy

The Buy vs. Build Dilemma

Request a Copy

 by Robert Goldstein, Quantifi

The financial service industry has changed significantly over the last decade. This rapidly changing environment requires significant investments in technology. There is no question that technology investment is increasingly a strategic rather than an operational decision. The question is not whether to use technology, but rather which one to use. Is it better to attempt to build a proprietary application or is a vendor system the more viable and sensible option?

Request a Copy