CEO Letter

Welcome to the May edition of Focus. 

In this edition, alongside an article by Rana Usman, Chief Operations Officer of NSE Clearing Ltd., explaining the innovation behind this year’s runner-up WFEClear Innovation Award entry, we present a summary of the research papers featured at this year's WFEClear conference. These papers were selected by the conference’s Scientific Committee based on their originality, academic rigour and relevance.

Fernando Cerezetti, Chief Risk Officer, ClearToken CCP Limited, opens with a fundamental rethinking of portfolio risk measurement, introducing an expanded Value-at-Risk framework (eVaR) that operates directly in risk-factor space to identify the worst-case loss across all combinations of factor moves consistent with a given confidence level, rather than collapsing portfolios onto a single dimension.

Tomaž Fleischman and Ethan Buchman, Co-Founders of Cycles Protocol SA, take a different angle on post-trade efficiency, proposing a settlement protocol that resolves payment cycles on the transaction graph itself, without the need for a central counterparty.

Our Editor’s Pick this month is by Rama Kumanduri, Managing Director, and Shahrzad Karimi, Director, at The OCC. They offer risk managers and model validators a factor-based analytical tool for CCP backtesting — one that anticipates where margin model deficiencies may arise from portfolio structure, rather than only diagnosing them retrospectively.

Finally, Rohit Barve, Dr. Aniket Bhanu and Rejaul Barbhuyan present research from NSE Clearing Ltd. on the use of deep generative models for options risk management, developing a scenario generation approach for option contracts that dispenses with traditional option pricing frameworks.

Last, but not least, Kaitao Lin, Senior Financial Economist at the WFE, studies whether climate-related risks are priced in commodity derivatives markets, using a novel setting based on iron ore options traded on the Singapore Exchange (SGX).

We hope you enjoy this edition.