Counterparty Credit Risk

Wednesday, December 4

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

Thursday, December 5

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