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Risk Management
Total risk management is the combination of all the elements of risk management into a consistent strategy...
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Training - Equity Market & Investment
Companies
Credit Risk of OTC Derivatives:
Two days
Over the last 20-odd years, over-the-counter swaps and options
have developed from a new product into a standard risk
management tool. Yet despite derivatives' commonplace nature,
establishing an effective risk management process remains a
challenging undertaking. This two-day course provides hands-on
spreadsheets with a simplified mathematical framework to
illustrate the general theory for evaluating the risk of
over-the-counter derivative transactions and focuses on the
practical implementation issues for establishing an effective
risk management process.
By completion of this course, the participants should be able
to:
· Identify the drivers of credit risk in Interest Rate,
Foreign Exchange and Equity OTC Derivatives
· Construct a framework for evaluating these risks
· Estimate Pre-Settlement Risk for Credit Limit purposes
· Contrast the risk calculation for Credit Limit purposes and
Risk/Return purposes
· Describe risk mitigation benefits of Netting and Collateral
and how to reflect them in your risk management process
· Discuss potential implementation issues and possible
approaches to resolve them so that you can get from the theory
of the framework to the reality of an effective risk
management process
DAY 1
Derivatives and the Evolving Role of the Credit Risk Manager
* Risk Management Framework
* 2 General Approaches:
* Credit Limit / Line
* •Current Credit Exposure
* •Potential Future Exposure / Risk Equivalents
* Risk / Return
* 3 Levels of Analysis:
* •Transaction
* •Counterparty
* •Firm-wide Portfolio
Statistics Review
* Distributions and Confidence Levels
* Estimates using 'the formula'
* Volatility – what is it and how is it calculated
Potential Future Exposure – Individual Transactions
* 5 Step Analytical Approach for Transactions
* Interest Rate Products
* Develop Exposure Pattern for Swaps, Caps, Floors and
Swaptions
* Issues for estimating yield curve changes
FX Products
* Develop exposure pattern for Swaps and Options
* Issues for estimating exchange rates
Equity Products
* Develop exposure pattern for Swaps and Options
* Issues for estimating equity prices
Complex Options
* Issues for developing exposure patterns for Average, Binary,
Spread and Path Dependent Options
DAY 2
Potential Future Exposure – Multiple Transactions
* Issues for estimating PFE across multiple products
* •Documentation, Netting Sets and Enforceability
* •Correlation among variables and the use of Monte Carlo
techniques
* •Stress Tests
Collateral
* Estimating Potential Future Exposure under a collateral plan
Credit Derivatives
* Estimating Counterparty Credit Risk
* Estimating Risk Mitigation Benefit
System Implementation Issues
* Data Quality
* •Transactions
* •Market Data
* Model Development and Maintenance
Risk / Return
* Potential Future Exposure for Limits vs. Risk / Return
calculations
* Issues for calculating Risk / Return
The Risk Management Process
* Integrating the Framework, Systems and Data
Course Fees
VAT to be included at the local rate, if applicable. Costs
shown are per delegate inclusive of refreshments, lunches and
seminar materials. Cost of accommodation is not included.
GBP 2000
Certificates of Participation
Certificates of participation are remitted to course
participants upon request. |
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