analysis

Recent SEC Enforcement

Given the trends that are emerging for enforcement by the U.S. Securities and Exchange Commission (SEC), what’s a risk manager to do? “Risk managers should use data and data analytics to identify patterns,” said Steven Hilfer, Managing Director in the Disputes & Investigations practice, Capital Markets at Navigant. He was the fourth and final speaker in a four-part webinar panel titled “SEC 2018 Enforcement Trends” sponsored by the Global Association of Risk Professionals (GARP) on July 25, 2018. He argued that the SEC is plunging ahead in the area of data analytics, and it expects companies “to identify patterns prior to being […]

An Insider’s View

“Quite frankly, I think some have underestimated Clayton,” said Ken Joseph, Managing Director, Disputes and Investigations practice, at Duff & Phelps. “There is a de-emphasis on some areas and re-prioritization of other areas—but he is still focused on wrongdoing.” Joseph was referring to Jay Clayton, the recently appointed chair of the U.S. Securities and Exchange Commission (SEC). Ken Joseph was the second speaker in a four-part webinar panel titled “SEC 2018 Enforcement Trends” sponsored by the Global Association of Risk Professionals (GARP) on July 25, 2018. He is also former Head of the Securities and Exchange Commission’s New York Regional Office Investment […]

A Tale of Two Funds

There are helpful and unhelpful models for determining risk-based profit attribution, according to Michael B. Miller, founder and CEO, Northstar Risk. This is part 2 of his explanation about how to attribute financial performance, given at a webinar sponsored by the Global Association of Risk Professionals on June 20, 2018. Miller gave an example of two funds. Fund A contains both long and short assets, is market neutral and generates positive alpha. Fund B is a macro fund that is market dependent and whose manager is correct 54 percent of the time. The returns of Funds A and B look very […]

Risk-Based Profit Attribution

“Even the best portfolio managers have bad years due to macroeconomic factors beyond their control,” said Michael B. Miller, founder and CEO, Northstar Risk, to an audience of financial risk professionals. This is Part 1 of his talk about how to attribute performance for financial management at a webinar sponsored by the Global Association of Risk Professionals on June 20, 2018. “We tend to view measurement of risk and performance as separate tasks, but performance can only be fully understood by taking risk into account,” Miller said. Performance is always evaluated relative to something else, such as “the market”—which commonly taken […]

As Fast as You Can

The implementation window for the new Current Expected Credit Loss (CECL) standard may seem plenty big enough, but there are loads of decisions to be made, such as “how will we calculate this?” “Decide on methodology and start implementing as fast as you can,” advised Masha Muzyka, Senior Director, Regulatory and Accounting Solutions at Moody’s Analytics. She was part of a round-table discussion, held on January 10, 2018, about the transition to CECL. The webcast was organized by the Global Association of Risk Professionals (GARP). The new CECL standard will bring significant changes, such as a spike in earnings volatility. […]

Challenges to modelling

Modelling the Current Expected Credit Loss (CECL) may present problems to some banks. Possibly a bank is collecting data for annualized charge-off rates and “how would that inform someone as to the loss rate over the lifetime of the portfolio?” asked Michael Gullette, SVP, Tax and Accounting at the American Bankers Association. The question is whether a bank has enough data of the right kind to see trends and relationships. “And if you have the data, what is the quality?” Gullette said. He was part of a round-table discussion about the transition to CECL that was webcast by the Global […]

Never too early to start

The “reasonable and supportable” clause of the new Current Expected Credit Loss (CECL) standard “is the most hotly debated part” of the regulation, according to Cristian deRitis, Senior Director, Consumer Credit Analytics at Moody’s Analytics. He was part of a round-table discussion about the transition to CECL that was webcast by the Global Association of Risk Professionals (GARP) on January 10, 2018. CECL is the new credit impairment standard under Financial Accounting Standards Board (FASB). “Auditors are grappling with what ‘reasonable and supportable’ means, too,” he added. For best practice in terms of modelling credit risk, the phrase boils down to whether […]

It’s all about the benchmark

The costs of financial transactions (in either the bond or stock markets) are quoted as bid and ask prices relative to the prevailing market price. But what, really, is meant by “prevailing market price” of thinly traded bonds? Two panellists discussed fixed income transaction cost analysis (TCA) at a webinar sponsored by the Global Association of Risk Professionals on December 12, 2017. Paul Daley, Managing Director at BondWave Information Lab, compared the market microstructure for stocks and bonds. BondWave LLC is a financial technology company and registered investment advisor that provides solutions to facilitate individual bond investing. “Data is the […]

Lower Bond Trading Costs

As the fixed income market evolves, what are the challenges and general directions of transaction cost analysis (TCA)? How can bond investors spend their money more wisely? “The same kind of conversation we used to have with equity dealers … can now occur with fixed income dealers. That means competition will drive down transaction costs,” said Henry Marigliano, Director at FIS Global Trading. FIS is an international provider of financial services technology. He was the was the first of two panellists discussing fixed income transaction cost analysis at a webinar sponsored by the Global Association of Risk Professionals on December […]

Early Warning Signs

“Overall, the energy sector remains stressed,” said Irina Baron, Associate Director at Moody’s Analytics. Baron was the third and final panellist discussing new dynamics in the handling of financial risk management in the energy sector at a webinar sponsored by the Global Association of Risk Professionals on November 29, 2017. Based on expected default frequency (EDF), 75 percent of US publicly-traded companies in the energy sector are not investment-grade risks. “Agency ratings give us a sense of which firms are more likely to default,” she noted. The drawback is that the realized default rate cannot be forecast. However, the expected […]