Financial institutions continue to face challenges in modeling, pricing and risk managing derivatives
Goyder, PhD, Director of Quantitative R&D at
On February 10,
European Commissioner (EC) Jonathan Hill and US Commodity and
Futures Trading Commission (CFTC) Chairman Timothy Massad,
announced a common approach regarding the requirements of
central clearing counterparties (CCPs). This marks an
important step towards the overall harmonization of the
cleared derivatives markets. However, in my view, firms are not
on easy street quite yet.
Going forward, financial institutions will continue to face
challenges around key issues like modeling, pricing and risk
managing derivatives in a still complex and perpetually
changing marketplace. But before I
get into some of those specific challenges, let’s
acknowledge the significance of this decision. The common
approach is valuable because it:
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