Current Issues in Financial Markets
How this section works
Current Issues is drawn from a rotating set of recent practitioner and regulatory readings, so the specific papers change each exam cycle. Treat the assigned reading list as authoritative and use the themes below as the scaffold on which to hang the details.
Recurring themes
Climate risk is split into physical risk and transition risk, measured through scenario analysis and heatmaps rather than historical data, with horizon mismatches against typical risk capital cycles. Model risk and AI/ML governance covers explainability, overfitting, data quality, and third-party model dependence. Digital assets and tokenisation raise custody, valuation, and market-integrity questions, and decentralised finance introduces novel leverage and liquidity-mismatch channels. Non-bank financial intermediation and private credit have shifted risk outside banking regulation, often with valuation opacity and liquidity transformation. The benchmark transition away from IBORs left residual legacy-contract and basis risk. Operational resilience and cyber risk connect to impact tolerances and third-party concentration, including cloud providers. Geopolitical fragmentation, sanctions, and supply-chain concentration are increasingly framed as risk drivers rather than tail events.
How to answer
Expect qualitative questions that test whether you can connect a current development to a familiar risk framework: which risk type does it create, how would you measure it, and what mitigant would you apply? Look for the answer that names a mechanism (leverage, liquidity mismatch, data limitation) rather than one that merely restates the headline.
Traps
Do not answer from general knowledge if the assigned reading takes a specific position - the exam rewards the reading's framing. Be careful with climate scenario horizons and with claims that a new instrument removes rather than transforms risk.
Study rule of thumb
For every current-issue reading, write one line each for: risk type created, measurement approach, key limitation, and regulatory response.