Counterparty Credit Risk

Day One

09.00 - 09.15 Welcome and Introduction

09.15 - 12.30

Background

  • Brief background of the evolution of CCR up to 2008
  • The 2008 crisis
  • Political and regulatory responses, Basel III, EMIR, IFRS13, Dodd Frank, OTC regulation
  • The ETD and OTC derivative markets

Overview of Counterparty Risk

  • The nature of Counterparty risk
  • Mitigation methods

A closer look at Risk Mitigation Methods

  • The ISDA Master Agreement and CSA
  • Netting
    • Payment netting
    • Close out netting
    • Trade compression
  • Termination and Resets
  • Use of Collateral
    • Regulatory requirements for OTC margin - BCBS D317
    • SIMM
  • Default Remote Entities
  • CCPs
    • Operation
    • Default management
    • Capital requirements for cleared trades

12.30 - 13.30 Lunch

13.30 - 17.00

Credit Exposure

  • Metrics: EPE, PFE etc.
  • Drivers of exposure
  • Credit Risk and Funding Risk
  • Use of Monte Carlo methods for IMM
  • Incorporation of netting and collateral into models

Default Probabilities, Credit Spreads and Funding

  • Default Probabilities
  • Actuarial and market implied PDs
  • Credit curves
  • Funding curves, capital costs and FTP

Day Two

09.00 - 12.30

Capital Requirements and regulation

  • Background to Pillar 1 capital requirements for market and credit risk
    • Standardised approach and IRB for credit risk capital requirements
  • EAD for regulatory capital
    • CEM
    • Standardised Approach for Counterparty Credit Risk (SA-CCR)
    • IMM
  • Basel III
    • CVA capital charge
    • Review of CVA capital
  • Finalising Basel III, d424
    • Reduced BA-CVA
    • Full-CVA
    • Revised Standardised Approach
  • Draft Revised CRD and CRR - 2016

12.30 - 13.30 Lunch

13.30 - 17.00

xVAs

  • CVA: Credit Valuation Adjustments
    • CVA allocation
  • DVA: Debit Valuation Adjustments
    • Accounting and regulatory views of DVA
  • BCVA: Bilateral CVA
  • FVA: Funding Valuation Adjustments
    • Link between FVA and DVA
  • MVA: Margin Valuation Adjustments
  • KVA: Capital Valuation Adjustments
  • ColVA
    • Discounting
    • Collateral valuation adjustments

Wrong Way Risk

  • Overview
  • Quantification and modelling approaches
  • Calibrating "Alpha"

XVA Management and Optimisation

  • Requirements for desks with internal model approval
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