Recommended articles: Risk Management and Financial Markets
The next S-curve in model risk management. How banks can drive transformations of the model life cycle in a highly uncertain business landscape (McKinsey).
An early view on euro area risk-sharing during the COVID-19 crisis. The economic fallout from the COVID-19 crisis has been asymmetric across euro area countries, leaving room for risk-sharing channels to operate. This column studies income risk-sharing in the euro area and finds that while it has so far been low, it was resilient throughout the crisis. Initial portfolio investment reverted quickly and intra-euro area cross-border portfolio investment exhibited low volatility. Only cross-border public flows have been limited. This suggests that the provision of unprecedented policy support has prevented private risk-sharing channels from collapsing, reducing the risk of a sudden stop in cross-border financial flows and a further exacerbation of the crisis (VoxEU).
Sovereign credit and exchange rate risks: evidence from Asia-Pacific local currency bonds. We study the dynamic properties of sovereign bonds in emerging market economies and their associated risk premiums. We focus on the properties of credit spreads, exchange rates, and their interaction. Relying on the term structure of local currency bonds issued by Asia-Pacific sovereigns, we find that local variables are significant in the dynamics of currency and credit risk, and the components of bond risk premiums reflecting these risks. Local currency bonds dramatically improve the investment frontier (BIS Working Paper).
Covid-19 and cyber risk in the financial sector. The financial sector has been hit by hackers relatively more often than other sectors during the Covid-19 pandemic. While this has not yet led to significant disruptions or a systemic impact, there are substantial risks from cyber attacks for financial institutions, their staff and their customers going forward. Financial authorities are working to mitigate cyber risks, including through international cooperation (BIS Bulletin).
CFA Institute - Enterprise Investor:
Last but not least, Will 2020 Be Seen as the Year of the SPAC Bubble? (Knowledge@Wharton).
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