Bloomberg reported the above last week here: https://rb.gy/sjfy4c
What was interesting about for us about this news was this:
"...bets on European bonds and credit-default swaps have sparked queries from market participants disgruntled by what they saw as out-of-step prices and aggressive tactics and saw the bank scrutinize how its positions were valued..."
In illiquid markets, a trading desk’s view (particularly of bigger banks) will often influence the prices and products it offers, which is a related reason for the roll of out of the various FRTB and CVA models under Basel III.
Everyone at PriceVault loves to dig into price data, and we took this news as an excuse to delve into reported trades of Casino CDS over the period. Indeed, there were large moves during the time, but more importantly for us, there were regular enough trades reported during the period to demonstrate observability - we think that there is some interesting work to do here to figure out the relationships between the trader's mark, price validation function, and the FRTB and CVA models. What is the best way to incorporate a trader's feel for market pricing, whilst at the same time benchmarking those prices to traded prices and ensuring that they aren't skewed towards a particular side?
PriceVault's solution is to use SMPC technology. SMPC stands for Secure Multi Party Computation, and it is the same technology and IP used by governments together to manage their satellites. No government wants any other government to know where their satellites are or have been, but at the same time, no-one wants their satellites to collide with any other. By using encrypted SMPC, governments are able to anonymously exchange satellite position data, avoid crashes and conflicts, and never need disclose any data externally. We have adapted this technology and put it to use for financial markets valuations. Any bank or financial institution can anonymously exchange trade data, avoid mismarking and risk issues, without disclosing any data.
We think this is a neat solution to an ongoing and long standing problem - ping us at data.pricevault.io to find out more.
Happy Holidays!
2022-12-28