Course highlights:

How the comprehensive risk measure will How to select suitable scenarios when impact correlation trading modelling stressed value at risk Understand the regulatory drivers behind How to validate the new market risk the new market risk measures measures How to model the incremental risk charge Interactions of market and credit risk in the trading book Overcoming computational challenges when modelling and validating

incisive-training.com/marketrisk

Modelling and validating new market risk approaches

IRC, CRM & Stressed VaR
New York 24 & 25 February 2011 London 3 & 4 March 2011

Modelling and validating new market risk approaches IRC CRM Stressed VaR

New York 24-25 February 2011 London 3-4 March 2011

Overview of course
As the dust settles following the worst of the global nancial crisis, it has been argued that one of the main causes of the meltdown was in part due to losses in the trading books of banks. With this in mind, regulators are in the process of conducting a radical overhaul of the banking sectors approach to managing market risk within their trading books. Inefciencies in the standard value at risk (VaR) model used to calculate trading book capital accurately has provided a catalyst for the implementation of a new regulatory package, dubbed Basel 2.5. Regulators in Europe and the United States have set a deadline of December 2011 for banks to model their new market risk measures. This unique two day seminar will provide an indepth focus on the complexities of these new market risk measures, specically looking at the incremental risk charge, comprehensive risk measure and stressed value at risk. Delegates will gain knowledge from practitioner led sessions on how to overcome the many challenges experienced in the modelling and validation processes.

Learning outcomes
Risk Management
By the end of this seminar you will have a clearer understanding of the regulatory drivers behind the new market risk measures, as well as expert knowledge on the modelling, implementation and validation processes of IRC, CRM and SVaR. Specically you will receive knowledge about: How to conduct periodic stress testing as required by regulators Selecting astressed periodwhen modelling stressed value at risk Dening the constant level of risk when modelling the incremental risk charge Accounting for missing risk factors when modelling the comprehensive risk measure The impact of the market risk charge for credit value adjustments (CVA) How to determine the liquidity horizon when modelling the incremental risk charge The use of graphic processing unit technology to overcome computational challenges

Who should attend?

This course has been designed for nancial institutions with trading books that are required to model and implement these new market risk measures. This seminar will also be of interest to regulators in Europe and North America who need to keep abreast of developments within the rms they supervise.
Banks Market Risk Credit Risk Quantitative Analysis Quantitative Research Risk Methodology Risk Control Credit Risk Manager Market Risk Modelling Credit Risk Modelling Risk Capital Modelling Model Validation Model Review Internal Audit Compliance IT (Risk Management) Regulators Bank Supervision Bank Examination Bank Regulation Financial Stability Economic Research

Venues & accommodation

London Please check website for updates New York Downtown Conference Center 157 William Street, New York, NY 10038 Tel 1-212-618-6997 Web www.downtownmeetings.com

Book now
call +44 0870 240 8859/+1 212 457 7789 email traininginfo@incisivemedia.com web incisive-training.com/marketrisk

Modelling and validating new market risk approaches IRC CRM Stressed VaR

New York 24-25 February 2011 London 3-4 March 2011

Course tutors: New York

Christopher Laursen, Senior Consultant, NERA Economic Consulting Jim Congleton, Global Head of Risk Capital Modelling, Barclays Capital Dr Mark Staley, Head of Risk and Capital Modelling Group, TD Bank Ricardo Rivera, Supervising Risk Management, New York State Banking Department Dherminder Kainth, Head of Quantitative Research Centre, Royal Bank of Scotland Gordon Liu, Senior Quantitative Analyst, HSBC

London
Adolfo Montoro, Market Risk Methodology, Deutsche Bank Marius Bochniak, Senior Manager, Risk Standards and Methods, Lloyds TSB Gabriel Medina, Group Risk, Wholesale and Market Risk, HSBC Peter Dobranszky, Head of Risk Model Validation, BNP Paribas Jerome Brun, Head of Market Risk Validation, Societe Generale Moises Gerstein, Director, Credit Markets Quantitative Analysis, ING Bank Elout Visser, Programme Manager, Corporate Market Risk Management, ING Bank Dr Marlene Wickenhauser, Counterparty Risk Management and Analysis, UniCredit Bank

Book now
call +44 0870 240 8859/+1 212 457 7789 email traininginfo@incisivemedia.com web incisive-training.com/marketrisk

Risk Management

Modelling and validating new market risk approaches IRC CRM Stressed VaR

New York 24-25 February 2011 London 3-4 March 2011

Cant nd what youre looking for?

Incisive Training values our delegate feedback and is always looking for new ideas and suggestions for interesting topics you would like to see produced as a training course. If you would like to submit a subject area or have a topic you would like to see covered at one of our training events please contact Agnes Mkpeti via agnes.mkpeti@incisivemedia.com

Coming up in December 2010 - February 2011

Managing systemic risk in nancial institutions and infrastructure New York 2 & 3 December 2010 www.centralbanking.com/systemicrisk Enterprise risk management techniques and practice Phoenix 7 9 December 2010 www.incisive-training.com/erm Confronting the challenges of capital reform New York 10 December 2010 London 13 December 2010 www.incisive-training.com/capitalreform Managing Liquidity: impact of Basel III on funding and strategy New York 10 & 11 February 2011 London 10 & 11 February 2011 traininginfo@incisivemedia.com

Basel 2.5 has material impact on trading book capital and represents a key element of global regulation to address the nancial crisis."
Jim Congleton, Global Head of Market Risk Capital Modelling, Barclays Capital

Book now
call +44 0870 240 8859/+1 212 457 7789 email traininginfo@incisivemedia.com web incisive-training.com/marketrisk

Risk Management

Modelling and validating new market risk approaches IRC CRM Stressed VaR

New York 24-25 February 2011 London 3-4 March 2011

New York
Day

Thursday 24 February 2011

1200 1330
Lunch
Modelling the incremental risk charge Which instruments are subject to the IRC? Debt securities, equities, securitisations, Collateralised debt obligations, structured credit products Which risks are captured within the IRC? Default events, rating migrations Modelling the IRC Migration losses Correlation: default correlations vs. asset correlations Loss given default (LGD) and exposure at default (EAD) One year potential defaults (PD) How to determine the liquidity horizon Methodology: Monte Carlo and portfolio models Discussion: what are the main challenges present throughout the modelling process? Dr Mark Staley, Head of Risk and Capital Modelling Group, TD Bank

1
0800 0900
Registration and coffee
Regulatory developments and proposed timelines for implementation of the models The key driver: assessing the performance of the VaR model during the financial crisis Overview of significant recent regulatory guidance Revisions to the Basel II market risk framework (July 2009) Guidelines for computing capital for incremental risk in the trading book (July 2009) Adjustments to the Basel II market risk framework (June 2010) The role and significance of the Trading Book Group at the BCBS Implementation deadlines for the new market risk models Christopher Laursen, Senior Consultant, NERA Economic Consulting

Tutor

Tutor

1500 1530

Afternoon break
Modelling the comprehensive risk measure for correlation trading portfolios The advantages of CRM over the standardised approach Products eligible under the CRM Collateralised debt obligations Credit default swaps used for hedging Considerations for CRM models in order to gain regulatory approval Ordering of defaults Credit spread risk including gamma and cross-gamma effects Volatility of implied correlations Basis risk: index-single name basis and index-bespoke basis Recovery rate volatility Cost of rebalancing hedges The process of modelling CRM Conducting simulations accounting for all the risk factors Conducting periodic stress testing as required by regulators Examination of key challenges: Lack of information to imply risk factor dynamics for market prices Simulating all risk factors in a consistent and arbitrage free fashion Gordon Liu, Senior Quantitative Analyst, Market Risk Management, HSBC

1000 1030

Morning break
Implementing a stressed VaR model Examining the key features of stressed VaR Regulatory requirements and intent One year period, contemporaneous global choice Selecting the stress period Backtesting and the use test Critical analysis of the BCBSs proposed period of stress (2007 2008) A practical approach for conducting stressed VaR calculations Exposure, scenario generation, analysing results, benchmark comparison /calibration Time Series backfill / proxies Key issues examined: How to define and select a relevantstressed period How to account for new risk factors not present within thestressed period Is containing the worst shocks enough? How to deal with a changing portfolio Calibration and sense checking Jim Congleton, Global Head of Market Risk Capital Modelling, Barclays Capital

Tutor

Tutor

1700

End of day one

Book now
New York
Day

call +44 0870 240 8859/+1 212 457 7789 email traininginfo@incisivemedia.com web incisive-training.com/marketrisk

Friday 25 February 2011

1200 1330
Lunch
The process of validating of the comprehensive risk measure What aspects of the model require validation? Model assumptions Parameter estimation Numerical stability Uncertainty of risk measures Analysing processes used for model validation Stress testing, scenarios, backtesting Key issues examined: Identifying suitable benchmark portfolios and scenarios to capture specific risk factors Integrations between market and credit factors Speaker to be confirmed

2
0800 0830
Registration and coffee
Validation of the incremental risk charge What aspects of the models require validation? Model assumptions Parameter estimation Numerical stability Uncertainty of risk measures Analysing processes used for model validation Stress testing, scenarios, backtesting Assessing key issues in relation to IRC Increase in trading book capital Defining suitable portfolios and scenarios to stress Should VaR and IRC be backtested together? Dr Mark Staley, Head of Risk and Capital Modelling Group, TD Bank

Tutor

1500 1530

Afternoon break
Computational and data challenges present during modelling and validation IRC challenges: Implementing efficient simulations which are not time consuming Huge number of scenarios required during validation How to price millions of bonds and CDSs quickly Possible solutions: GPU computing, CDO valuation technology Stressed VaR challenges: The use of approximate historical data for scenarios, data for new products, risk factors Possible solutions: Monte Carlo simulation, adoption of proxies similar to existing VaR models CRM challenges: Estimating a 0.1% percentile on a 1 year time horizon Possible solutions: Should extreme value theory be used to understand the tail? Analytical approximations and speed ups Examining the operational risk challenge of having multiple market risk calculations Dherminder Kainth, Head of Quantitative Research Centre, Royal Bank of Scotland

Tutor

1000 1030

Morning break
Validation of stressed value at risk: a regulators perspective What aspects of the models require validation? Model assumptions Parameter estimation Numerical stability Uncertainty of risk measures Analysing processes used for model validation Stress testing. scenarios backtesting Assessing key issues in relation to stressed VaR Assumes that VaR is already validated Are all risk factors covered? Issues related to thestressed period Ricardo Rivera, Supervising Risk Management Specialist, NewYork State Banking Department

Tutor

Tutor

1700

End of day two

Modelling and validating new market risk approaches IRC CRM Stressed VaR

New York 24-25 February 2011 London 3-4 March 2011

London
Day

Thursday 3 March 2011

1230 1330
Lunch
Modelling the incremental risk charge Which instruments are subject to the IRC? Debt securities, equities, securitisations, Collateralised debt obligations, structured credit products Which risks are captured within the IRC? Default events, rating migrations Modelling the IRC Migration losses Correlation: default correlations vs. asset correlations Loss given default (LGD) and exposure at default (EAD) One year potential defaults (PD) How to determine the liquidity horizon Methodology: Monte Carlo and portfolio models Discussion: what are the main challenges present throughout the modelling process? Marius Bochniak, Senior Manager, Risk Standards and Methods, Lloyds TSB

1
0830 0900
Registration and coffee
Regulatory developments and proposed timelines for implementation The key driver: assessing the performance of the VaR model during the financial crisis Overview of significant recent regulatory guidance Revisions to the Basel II market risk framework (July 2009) Guidelines for computing capital for incremental risk in the trading book (July 2009) Adjustments to the Basel II market risk framework (June 2010) The role and significance of the Trading Book Group at the BCBS Implementation deadlines for the new market risk models What are banks doing to address the problem? Speaker to be confirmed

Tutor

Tutor

1530 1600

Afternoon break
Modelling the comprehensive risk measure for correlation trading portfolios The advantages of CRM over the standardised approach Products eligible under the CRM Collateralised debt obligations and credit default swaps used for hedging Considerations for CRM models in order to gain regulatory approval Ordering of defaults Credit spread risk including gamma and cross-gamma effects Volatility of implied correlations Basis risk: index-single name basis and index-bespoke basis Recovery rate volatility Cost of rebalancing hedges The process of modelling CRM Conducting simulations accounting for all the risk factors Conducting periodic stress testing as required by regulators Examination of key challenges: Lack of information to imply risk factor dynamics for market prices Gabriel Medina, Group Risk, Wholesale and Market Risk, HSBC

1030 1100

Morning break
An approach to modelling stressed VaR Examining the key features of stressed VaR Regulatory requirements and intent One year period, contemporaneous global choice Selecting the stress period Backtesting and the use test Critical analysis of the BCBSs proposed period of stress (2007 2008) A practical approach for conducting stressed VaR calculations Exposure, scenario generation, analysing results, Benchmark comparison / calibration Time series backfill / proxies Key issues examined: How to define and select a relevantstressed period and account for new risk factors Is containing the worst shocks enough? How to deal with a changing portfolio Calibration and sense checking Adolfo Montoro, Market Risk Methodology, Deutsche Bank

Tutor

Tutor

1700

End of day one

Book now
London
Day

call +44 0870 240 8859/+1 212 457 7789 email traininginfo@incisivemedia.com web incisive-training.com/marketrisk

Friday 4 March 2011

1230 1330
Lunch
Computational and data challenges present during modelling and validation IRC challenges: Implementing efficient simulations which are not time consuming Huge number of scenarios required during validation How to price millions of bonds and CDSs quickly Possible solutions: GPU computing, CDO valuation technology Stressed VaR challenges: The use of approximate historical data for scenarios, data for new products, risk factors Possible solutions: Monte Carlo simulation, adoption of proxies similar to existing VaR models CRM challenges: Estimating a 0.1% percentile on a 1 year time horizon Possible solutions: Should extreme value theory be used to understand the tail? Analytical approximations and speed ups Examining the operational risk challenge of having multiple market risk calculations Moises Gerstein, Director, Credit Markets Quantitative Analysis, ING Bank Elout Visser, Programme Manager, Corporate Market Risk, ING Bank

2
0830 0900
Registration and coffee
Validation of the incremental risk charge and stressed value at risk What aspects of the models require validation? Model assumptions, parameter estimation, numerical stability, uncertainty of risk measures Analysing processes used for model validation Stress testing, scenarios, backtesting Assessing key issues in relation to IRC Increase in trading book capital Defining suitable portfolios and scenarios to stress Should VaR and IRC be backtested together? Assessing key issues in relation to stressed VaR Assumes that VaR is already validated Are all risk factors covered? Issues related to thestressed period Peter Dobranszky, Head of Risk Model Validation, BNP Paribas

Tutor

Tutor

1030 1100

Morning break
The process of validating of the comprehensive risk measure What aspects of the model require validation? Model assumptions Parameter estimation Numerical stability Uncertainty of risk measures Analysing processes used for model validation Stress testing, scenarios, backtesting Key issues examined: Identifying suitable benchmark portfolios and scenarios to capture specific risk factors Integrations between market and credit factors Jerome Brun, Head of Market Risk Validation, Societe Generale

1500 1530

Afternoon break
Counterparty credit risk in the trading book: an outlook to Basel III Treatment of counterparty risk present in the trading book in the market risk context Stressed exposure requirement Reducing procyclicality Increased capital charge Longer margin periods: taking illiquid markets into account CVA, the price of counterparty risk and its relation to market risk in the trading book Unilateral vs. bilateral CVA Modelling CVA with default correlation Importance of the market risk charge for CVA Correlation between credit and market factors Considering wrong way risk in the exposure simulation The impact of central clearing and what lies ahead for risk management in the trading book Dr Marlene Wickenhauser, Counterparty Risk Management and Analysis, UniCredit Bank

Tutor

Tutor

1700

End of day two

Modelling and validating new market risk approaches IRC CRM Stressed VaR

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Modelling and validating new market risk approaches IRC CRM Stressed VaR
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