Insights
Tokenization: Benefits and Risks
Tokenization has the potential to revolutionize markets, primarily through the application of blockchain technology. It allows assets – particularly high-value ones like real estate, art, and company shares – to be divided into smaller, more affordable units. This fractional ownership makes it possible for a larger pool of investors to participate, increasing liquidity and accessibility.…
How to Identify and Mitigate Hidden Risk Concentrations
Both financial institutions and their regulators must deal with risk concentrations. They come in two types: observable and hidden. To manage these concentrations, banks set risk limits on various types of exposures, such as by borrower, industry or maturity. Larger institutions tend to be more diversified, but still need to (1) aggregate their exposures to…
The Cash Management Impact of the Fed’s Rate Cut: How to Minimize Risk and Maximize Return
Now that the Federal Reserve has started cutting interest rates, the shape of the yield curve is going to change – and cash management strategies must be reviewed. Cash management is a critical task for treasurers and CFOs across industries, especially in the companies that need to balance liquidity with return on capital. Financial institutions need…
The Risk and Return Profile of Index-Linked Annuities: How to Build the Optimal Portfolio
Complex financial products like registered index-linked annuities (RILAs) feature an array of risks and benefits. Evaluating all possible outcomes is essential to developing an optimal long-term RILA investment strategy that maximizes return and minimizes risks. GARP: The Risk and Return Profile of Index-Linked Annuities: How to Build the Optimal Portfolio
What just happened in world capital markets? – Short-term Turbulence vs. Long-term Consequences
We’ve seen extreme turbulence in the markets over the last week. The Interbank Rate in Japan averaged 0.10 percent from 2014 until 2024, reaching an all-time high of 0.45 percent in August of 2024. At Straterix we ran an out-of-sample back-testing of the rates in Japan. The probability of this shock within the third quarter of…
Stagflation Risk is on the Rise – AND – It’s Not Coming Alone
Already two years ago, the Straterix analysis showed that the economic environment at that time carried a high risk of stagflation – a combination of inflation and stagnant growth – which hasn’t been experienced in 40 years. Then we were quite lonely making this claim. Today however, we’re in good company as other leading financial…
Republic First. Which bank will fail next?
The Global Financial Crisis of 2008/9 was precipitated by subprime mortgage lending and the magic of turning risky loans into investment-grade securities. Could commercial real estate cause the next one? It’s already helped Republic First Bank go to the wall (it was seized by regulators last month). Fed Chair, Jerome Powell, expects more to follow…
Interview in Risk.Net with Alla Gil: Enhancing Bank Stress Tests with AI and Advanced Analytics
In the interview with Alla Gil, co-founder and CEO of Straterix, the discussion revolves around how banks manage and analyze stress scenarios, emphasizing the traditional three-step process: risk identification, narrative creation, and quantification of impacts. The current method, heavily reliant on past data and modeler’s assumptions, often misses complex market dynamics and lacks early warning…
The American Way: A Stress Test Substitute for Basels IRRBB – A must read article on #Risk.net
“In the past 15 years, regulators were reflecting on past banking failures. These new scenarios mirror the collapse of SVB – just like how following the 2008 recession, the Fed’s primary stress scenarios were designed based on the condition of that time” Alla Gil The American Way: A Stress Test Substitute for Basels IRRBB –…
The Budget Brain-Teaser: How to Optimize Capital
It is difficult to make predictions, especially about the future.” Nowhere is Yogi Berra’s deceptively brilliant aphorism more applicable than with financial planning. From households, to governments to financial institutions, allocating a budget for certain activities usually uses what’s happened in the past as a baseline with which to try to predict what will probably…
Black Swans vs. A.I.
How is artificial intelligence changing the banking industry? Will bank analysts be replaced by A.I.? And is that a bad thing? A former Credit Suisse analyst and a veteran European bank expert weigh in on the latest episode of BTN Pod.
New York Community Bancorp – Is the $1B Capital Injection Enough?
A few weeks ago, New York Community Bancorp (NYCB) was downgraded to below investment grade status. The fears of a continuation of the regional banking crisis have been mounting. Early last week, its stock dropped sharply down, going below $2 per share though it recovered slightly after a $1B capital injection (see Figure 1). The…