Visit us regularly to see our periodic updates to the Insights page, where we share new and recently-published articles and resources.
CMRA Recent Interviews and Press
"Citigroup Inc. and the wreckage of Lehman Brothers Holdings Inc. have resolved a fight over $2.1 billion that dates to the financial crisis, while quietly burying a key question about derivatives-trading practices.
Citigroup agreed Friday that it will give back $1.74 billion to the estate of the failed New York-based investment bank. Citigroup had kept about $2.1 billion that Lehman had on deposit with it for trades on everything from interest rates to corporate and sovereign debt at the time of the 2008 bankruptcy. . .
He said there was hope it would bring a legal opinion on issues like bid-ask spreads, netting or combinations of trades, and whether counterparties are entitled to the cost of replacing trades even if they don’t actually replace them.
'It would have been nice to get clarity from a judicial process,' Niculescu said in a phone interview. He noted that a public ruling could have a big downside for both Citigroup and Lehman, however; for Citigroup, it could affect current trading practices, and for Lehman, it could set a precedent for how it would settle remaining claims"
Sep 29, 2017
Lexis PLS Banking & Finance analysis: Capital Market Risk Advisors (CMRA) has surveyed market participants about the new variation and initial margin requirements. Leslie Rahl and Peter Niculescu, partners at CMRA and members of the P.R.I.M.E. Finance Panel of Experts outline the responses on this topic and highlight the potential benefits and costs of implementing the new regulations and explain that while the new regulations seek to reduce both systemic risk and counterparty risk, they likely will not significantly curtail future legal disputes surrounding derivatives closeout.
Sep 7, 2017
The expert analysis and testimony prepared by Capital Market Risk Advisors (CMRA) - a leading risk management, risk governance, and litigation support boutique for the past 25 years - was extensively cited in a 524-page judgement dismissing all 187 claims, with almost $2 billion in alleged damages at stake, against Carlyle Capital Corporation Ltd's directors in a case involving leveraged RMBS.
Sep 4, 2017
Helpful Web Resources
Associations & Organizations
- Alternative Investment Management Association (AIMA)
- Managed Funds Association (MFA)
- Securities Industry and Financial Markets Association (SIFMA)
- Financial Accounting Standards Board (FASB)
- Financial Stability Board
- Global Association of Risk Professionals (GARP)
- Global Risk Institute (GRI)
- International Association for Quantitative Finance (IAQF)
- International Swaps and Derivatives Association (ISDA)
- P.R.I.M.E. Finance
- Professional Risk Manager’s International Association (PRMIA)
- BIS Semiannual derivatives statistics
- Volume data for over-the-counter derivatives
- ISDA SwapsInfo
- Visualize over-the-counter derivatives data
- OCC Quarterly Report on Bank Derivatives Activities
- Quarterly report on bank and bank holding company derivative activities
- Bloomberg Markets Magazine
- Financial Times
- Matt Levine's Money Stuff
- A daily newsletter highlighting the latest news and developments in all things finance, delivered with a healthy dose of humor.
- The Wall Street Journal
- Federal Reserve Economic Data (FRED)
- NYU Stern Volatility Laboratory
- Research on risks in financial markets, with daily calculations of volatilities and correlations on a wide range of assets
- Coverage of financial industry, with a focus on risk management, derivatives, and complex finance
- Commodity Futures Trading Commission (CFTC)
- Federal Deposit Insurance Corporation (FDIC)
- Federal Housing Finance Agency (FHFA)
- Federal Reserve Board (Fed)
- Financial Industry Regulatory Authority (FINRA)
- National Futures Association (NFA)
- Office of the Comptroller of the Currency (OCC)
- U.S. Securities and Exchange Commission (SEC)
- Asset Securitization Report
- Coverage, analysis, and commentary on structured finance markets
- Structured Finance Industry Group
- Educational resources on structured finance and securitization
- The Journal of Structured Finance
- Quarterly academic journal on structuring and investing in structured finance.
Recent Literature and Regulatory Guidance
Bank of England
- Judging the adequacy of return distribution estimation technigques in initial margin models (September 1, 2017)
- Machine learning at central banks (September 1, 2017)
- Central Bank information and the effects of monetary shocks (August 25, 2017)
- Bank Capital and risk-taking: evidence from misconduct provisions (August 18, 2017)
- The economics of distributed ledger technology for securities settlement (August 18, 2017)
- Central counterparty auction design (August 11, 2017)
- The impact of Solvency II regulations on life insurers' investment behavior (July 7, 2017)
- Dealer intermediation, market liquidity and the impact of regulatory reform (July 14, 2017)
- Step away from the zero lower bond: small open economies in a world of secular stagnation (July 14, 2017)
Basel Committee on Banking Supervision
- Basel III Monitoring Report (September 2017)
- Basel III definition of capital - Frequently asked questions (September 2017)
- Implications of fintech developments for banks and bank supervisors – consultative document (August 31, 2017)
- Criteria for identifying simple, transparent and comparable short-term securitisations (July 2017)
- Capital treatment for simple, transparent and comparable short-term securitisations (July 2017)
- IOSCO CR05/2017 Open-ended Fund Liquidity and Risk Management - Good Practices and Issues for Consideration
- IOSCO CR02/2017 Framework for supervisory stress testing of central counterparites (CCPs) and Cover Note
- IOSCO FR12/2017 Analysis of Central Clearing Interdependencies
- Implementation of Basel Standards (July 2017)
Bank for International Settlement
- Effects of capital controls on foreign exchange liquidity (August 2017)
- Segmented money markets and covered interest parity arbitrage (July 2017)
Commodity Futures Trading Commission
- CFTC Orders The Royal Bank of Scotland to Pay $85 Million Penalty for Attempted Manipulation of U.S. Dollar ISDAFIX Benchmark Swap Rates (February 2017)
- With this most recent enforcement action, the CFTC has imposed over $5.2 billion in penalties against banks and brokers with relationship to ISDAFIX, foreign exchange, and LIBOR benchmark issues. The settlement reinforces the importance of the integrity of derivatives benchmarks, which market participants rely upon to settle and to value a wide range of derivatives transactions.
European Central Bank
- Do negative interest rates make banks less safe? (September 2017)
- Multiple lending, credit lines and financial contagion (July 31, 2017)
Federal Reserve Bank of New York
- Why Pay Interest on Required Reserve Balances? (September 25, 2017)
- Regulatory Incentives and Quarter-End Dynamics in the Repo Market (Liberty Street Economics - August 7, 2017)
- At the New York Fed: The Appropriate Government Role in U.S. Mortgage Markets (August 23, 2017)
- Were Banks 'Boring' before the Repeal of Class-Steagall? (July 31, 2017)
- How the Fed Changes the Size of its Blance Sheet: The Case of Mortgage-Backed Securities (July 11, 2017)
Federal Reserve Board
- Faster Payments: Market Structure and Policy Considerations (September 2017)
- How does the Fed Adjust its Securities Holdings and Who is Affedted? (September 2017)
- Optimal Bank Regulation in the Presence of Credit and Run Risk (September 2017)
- Wayne Passmore and Alexander H. von Hafften, Improving the 30-Year Fixed-Rate Mortgage (August 2017)
- How have banks been managing the composition of high-quality liquid assets? (August 2017)
- Forward-looking and Incentive-compatible Operational Risk Capital Framework (August 2017)
- Why Are Banks Not Recapitalized During Crises? (August 2017)
- Monetary Policy Report (July 7, 2017)
Financial Stability Board
International Monetary Fund
- The Effect of Leverage on Asset Sales Between Finanical Institutions (September 2017)
- Big Data: Potential, Challenges, and Statistical Implications (September 2017)
- Stabilizing the System of Mortgage Finance in the United States (August 8, 2017)
- Cyber Risk, Market Failures, and Financial Stability (August 7, 2017)
- Back to the Future: The Nature of Regulatory Capital Requirements (August 4, 2017)
- The Nonlinear Interaction Between Monetary Policy and Financial Stress (August 4, 2017)
- Designing a Simple Loss Function for Central Banks: Does a Dual Mandate Make Sense? (July 19, 2017)
- On Swing Pricing and Systemic Risk Mitigation (July 18, 2017)
- Basel Compliance and Financial Stability: Evidence from Islamic Banks (July 18, 2017)
- Central Bank Emergency Support to Securities Markets (July 10, 2017)
- Financial Stability Analysis: What are the Data Needs? (July 10, 2017)
Office of the Comptroller of the Currency
- Semiannual Risk Perspective (Fall 2016)
- Strategic, credit, operational, and compliance risk remain top concerns. Risk governance over sales practices was highlighted in light of recent challenges in risk oversight and governance.
International Swaps and Derivatives Association
- [ISDA in Review (September 2017)]
- SwapsInfo Second Quarter 2017 Review (August 16, 2017)
- ISDA videos on alternatives interest rate benchmarks (July 6, 2017)
: http://www2.isda.org/attachment/OTY3Mw==/ISDA In Review - September 2017.pdf
- Compliance fears slow use of synthetics swaps to cut IM (September 7, 2017)
- Libor's sunset sees US repo market cast a longer shadow (September 11, 2017)
- US regulators approve VM route to capital savings (August 21, 2017)
- Banks warn clients of possible unwinds as VM deadline nears (August 21, 2017)
- Capital savings from new IM regime elude dealers (August 17, 2017)
- CCP margin backtests can hide flaws, research finds (July 4, 2017)
U.S. Securities and Exchange Commission
- Report to Congress: Access to Capital and Market Liquidity (August 2017)
- Investor Bulletin: Initial Coin Offerings (July 25, 2017)
- Access to Capital and Market Liquidity (August 2017)
- SEC sanctions investment manager for overvaluing assets on financial statements (July 19, 2017)
European Securities and Markets Authority
Risk Management for Institutional Investors:
Fulfilling Fiduciary and Strategic Responsibilities
By Richard Horwitz and David Tyson, Capital Market Risk Advisors; Published by Risk Books, Nov 2013
More about the book
Risk Management for Institutional Investors: Fulfilling Fiduciary and Strategic Responsibilities addresses how board members, directors, trustees, and members of the C-suite overseeing a pension or endowment fund can properly manage and mitigate risk. It details on a practical level how the necessary data can be collected and reported to this governing board within the broad framework of current risk management practices.
This holistic executive report will include discussions of risk appetite, risk governance, board risk communication, and board risk training, and will address how highly technical and granular data can be synthesized so that it can be reported to a board that may only meet for three hours every three months, in turn informing the decisions the institutional investors make.
Risk Budgeting, Second Edition:
Risk Appetite and Governance in the Wake of the Financial Crisis
Edited by Leslie Rahl, Capital Market Risk Advisors
More about the book
- This fully updated and revised second edition of the best-selling guide Risk Budgeting expands upon the first edition, continuing to provide a road map for more effective risk allocation and better return per unit of risk taken. This edition reflects in particular the growing focus on risk appetite and governance in the risk budgeting environment.
Hedge Fund Transparency:
Unraveling the Complex and Controversial Debate
By Leslie Rahl, Capital Market Risk Advisors
More about the book
The only title that focuses solely on hedge fund transparency and offers a balanced perspective that appreciates both the needs of institutional investors and hedge fund managers.
Presents clear insight on why hedge fund transparency is an issue, as well as offers solutions
- Includes "perspectives" based on interviews with numerous eminent practitioners from both sides of the investor/hedge fund debate
- Service providers including consultants, prime brokers, third party marketers, capital introducers, systems providers, lawyers and accountants, will additionally acquire an enhanced insight into the needs of both investors and hedge funds in order to tailor their services to the market needs
- The press and the regulators can also achieve enhanced understanding of this complex and controversial subject
- Written by the best-selling author and practitioner Leslie Rahl, who is the chair of the Investor Risk Committee of the IAFE Committee on Hedge Fund
- Transparency and is uniquely placed to advise on and explain the issues for all concerned participants
A New Approach to Investing
Edited by Leslie Rahl, Capital Market Risk Advisors; Published by Risk Books, November 2000
More about the book
A practical and authoritative introduction to the concept of risk unit allocation as an alternative and more effective decision-making process for long-term investors.
Make an informed decision about how to implement and execute a "risk unit allocation" investment policy
- Analysis of techniques to assess how risk might impact long-term Investment returns
- Introduces methods to allocate assets based on the "risk unit" exposures - in individual asset classes and on a portfolio basis, to meet long-term pension obligations and investment return objectives
- Investigates ways to use VAR to accommodate a long-term investment horizon
- Contributions from leading experts drawn from consultancies; large institutional investors; pension plans; investment banks and academia
- Leslie Rahl has donated her proceeds from the sale of the book to the Fischer Black Memorial Foundation.
Hedge Fund Risk Fundamentals:
Solving the Risk Management and Transparency Challenge
By Richard Horwitz, Capital Market Risk Advisors
More about the book
In the constantly evolving hedge fund marketplace, nothing is more central--but in many ways, more amorphous and elusive--than risk. Yet there remains no standard for analyzing and measuring risk within this highly secretive, largely unregulated field, leaving the thousands of hedge funds--and the tens of thousands of hedge fund investors--in dangerously dim light. The industry has not solved the "transparency" challenge--communicating risk to investors without disclosing proprietary information.In the constantly evolving hedge fund marketplace, nothing is more central--but in many ways, more amorphous and elusive--than risk. Yet there remains no standard for analyzing and measuring risk within this highly secretive, largely unregulated field, leaving the thousands of hedge funds--and the tens of thousands of hedge fund investors--in dangerously dim light. The industry has not solved the "transparency" challenge--communicating risk to investors without disclosing proprietary information.
Hedge Fund Risk Fundamentals is the first book to bring these issues to the forefront. With clarity, concision, and minimal math, Richard Horwitz lays out the key components and the cutting-edge processes in the field of hedge fund risk management today. Against that backdrop, he presents a groundbreaking utility destined to set the standard for transparency and risk management within the hedge fund universe.
You’ll learn why, when it comes to risk management, 1 + 1 = 1.41. For all of those perplexed by the difficulties of assessing risk in hedge fund investing, Horwitz’s concepts make for an invaluable road map and a demystifying resource that hedge funds and investors at all levels will find indispensable.
Value at Risk
"This book has become an industry standard for value at risk."
Leslie Rahl, president, CMRA
More about the book
- To accommodate sweeping global economic changes, the risk management field has evolved substantially since the first edition of Value at Risk, making this revised edition a must. Updates include a new chapter on liquidity risk, information on the latest risk instruments and the expanded derivatives market, recent developments in Monte Carlo methods, and more. Value at Risk, Second Edition, will help professional risk managers understand, and operate within, today's dynamic new risk environment.
How I Became a Quant
By Richard R. Lindsey and Barry Schachter
More about the book
"Quants"--those who design and implement mathematical models for the pricing of derivatives, assessment of risk, or prediction of market movements--are the backbone of today's investment industry. As the greater volatility of current financial markets has driven investors to seek shelter from increasing uncertainty, the quant revolution has given people the opportunity to avoid unwanted financial risk by literally trading it away, or more specifically, paying someone else to take on the unwanted risk.
How I Became a Quant reveals the faces behind the quant revolution, offering you the chance to learn firsthand what it's like to be a?quant today. In this fascinating collection of Wall Street war stories, more than two dozen quants detail their roots, roles, and contributions, explaining what they do and how they do it, as well as outlining the sometimes unexpected paths they have followed from the halls of academia to the front lines of an investment revolution.
Risk Management: The State of the Art
Edited by Stephen Figlewski and Richard M. Levich
More about the book
The articles in this volume examine the "State of the Art" in risk management from the standpoint of academic researchers, market analysts and practitioners, and government observers with
Risk Management: Where Are We Heading? Where Have We Been? Contributed by Leslie Rahl.