Measuring and mitigating counterparty default risk has been one of the risk management topics that has challenged risk professionals in the past 10-15 years. Since the global scale trading of OTC derivative contracts there have been very few situations (Drexel, LTCM, Barings, Lehman Brothers) where practitioners could have tested the effectiveness of ISDA Master Netting Agreements and collateral agreements in stressed markets. The financial crisis that commenced in 2007 has offered an unprecedented laboratory for such research.

The new changes in the Basel Capital Accord (“Basel III”) have imposed major challenges to treasuries and derivative market makers in most banks (regulated under Basel III). As a consequence of the global financial crisis, most derivative market makers have transgressed to transacting most derivatives under bilateral ISDA CSA templates covering bilateral collateral provisions along with daily margining beyond the ubiquitous netting features. As a consequence, as collateral typically earns the overnight rates while most derivatives are (3 to 6 months) LIBOR based, a derivative transaction (even if fully hedged) would be conducive to basis risk – which gets penalized with additional regulatory capital under Basel III. Consequently, many dealers have taken the pains to “re-swap” their positions (or portfolios) to the OIS curves – in an attempt to eliminate the basis risks inherited.

Above and beyond, as the Basel III credit conversion factors for derivative transactions became rather “grueling” in terms of regulatory capital coverage, many Banks have created special CVA desks aiming to optimizing the capital levy associated with the counterparty risk taken (as measured by the CVA – “Credit Valuation Adjustment”).

This two day training seminar is geared to provide an overview to industry practitioners on the role, functionalities, inherent methods and processes of a modern CVA desk imbedded in a derivatives trading unit. The course will focus on methodologies, limit systems and processes along with day to day management techniques used by leading global financial institutions. At the end of the seminar, participants will be able to better assess the effectiveness of their own legacy counterparty risk processes and possibly take away ideas on how to enhance their systems to make them “state of the art” and compliant with the emerging regulatory stipulations on capital coverage (“Basel III”).

Who should attend

• Credit Risk Managers
• Trading CVA Professionals
• Counterparty Risk Managers
• Risk IT Professionals
• Internal Auditors

Benefits of attending this comprehensive two Day training Course are

Learn about the advanced methods employed by leading financial institution to measure potential future exposure of OTC derivatives.

Design a tailored counterparty risk framework congruent with the requirements of a large universal bank and compliant with the emerging regulatory standards – including features like margining, default triggers, close-out netting agreements and collateral.

Review some of the best in class limit systems and installations for counterparty risk.

Discuss in a case study format the benefits of mitigating counterparty risk for credit default swaps via static replication techniques.