We've had 2-3 smaller discussion here on central risk books - the idea seems to be that banks (mainly in Equities, but increasingly also FICC / cross-asset) aggregate risks from individual desks to more effectively hedge on a "whole bank" and netted basis (see e.g. http://tabbforum.com/opinions/who-will-win-tradin…)
**But how does it work in practice? **
Do banks mainly implement it as an “overlay” that aggregates risk, while nothing changes for individual desks? This would be easier to implement, but misses cost saving potential from cross-hedging trades in real-time between desks.
On the other hand offloading all risk from individual desks to a CRB straight away raises the questions a) how this is priced and b) why still have any separate books at all, if their risk is (immediately?) offloaded to someone else. How can you accurately attribute p&l in this case?
Any insights highly welcome.....
also interested
By the CRB do you mean the XVA trading desks?
the central risk desk sees the firms aggregate risk position across all securities, simplified into a subset of risk points...and hedges when any one risk point gets too large.
i've seen the central risk manager walk over to the treasury desk and buy 20,000 10yr tsy futures (about 2 billion 10yr notes) for the central risk book (because the firm was net short 10yr yields by a sufficiently large amount for the risk desk to want to hedge some % of that risk).
Central Risk book (Originally Posted: 06/05/2018)
Hi All,
I am looking for some answers around central risk book. Is there a difference between central risk book and central execution desk? Are both the same? Also, how are delta hedging desk, central risk book, central execution desks and dark pools related? Also if you could let me know where I can find the evolution of central risk book. Need this for research purposes.
Thanks in advance.
Beatae veritatis sed quisquam enim asperiores dolores. Dolores sint non illo aut dolores eius nisi. Id possimus ratione quis rem. Totam ipsa et porro. Repellat excepturi mollitia maiores aspernatur quis. Quia aut enim nulla error ut.
Assumenda ad voluptatibus dignissimos dolorem consequatur ipsa sequi. Non sit sit dolores laborum consequatur possimus.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...