Gamma Advisory Services - Advanced Risk 2013/04

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Advanced risk management in the areas of market, counterparty risk, credit risk and ALM

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Gamma Advisory Services - Advanced Risk 2013/04

  1. 1. Gamma Advisory ServicesApril 20131Risk Training, Technology & AdviseGamma Advisory ServicesRisk Advisory, Training, & Technology Services2.Advanced Risk Programs : April 2013
  2. 2. “The only skill that will be of lasting value in the 21stcentury will be the skill of learning new skills. All otherskills will become obsolete with the passing of time”Peter DruckerPeter DruckerPeter DruckerPeter DruckerGamma Advisory Services April 20132
  3. 3. A brief background presentationA brief background presentationA brief background presentationA brief background presentationGamma Advisory Services April 20133
  4. 4. ObjectivesObjectivesObjectivesObjectivesGamma Advisory Services April 20134Promote the use of best of current practices in riskmanagementTaxonomy of methodologiesLink formal theory to all risk applicationsTraining spectrum of staff in across all functionsPrivate certification of staffCater to all levels: review, vocational & advanced aswell as for staff at entry, specialist, senior & boardlevels
  5. 5. ServicesServicesServicesServicesGamma Advisory Services April 20135Skill transfer programs based on full review ofcutting edge industry practices & researchcovering all major areas of riskTraining programs:Review: conceptualVocational: teaching, practice and testingOverview: policy, monitoringRisk advice on policy and practices
  6. 6. UsersUsersUsersUsersGamma Advisory Services April 20136New hires, functional specialists and top management(based on program)Cross functional usersFront, Middle, and Back OfficesRisk,AnalyticsInformationTechnology (systems, programming, testing &support)Finance,Risk audit, complianceLegal
  7. 7. Delivery MechanismDelivery MechanismDelivery MechanismDelivery MechanismGamma Advisory Services April 20137Based on specific programSeminar or ClassroomReading or Review matterPresentationComputer aided demonstrationSpreadsheet exercisesTesting for vocational programs
  8. 8. The PrincipalThe PrincipalThe PrincipalThe PrincipalGamma Advisory Services April 20138Pravin Shirnamé, Principal Advisor, GammaAdvisory Services:Set up Gamma Advisory Services in 2010 aimed at evangelising betterrisk management practicesFormer head of the Market Risk function at HDFC Bank, India.Part of core team that set up Risk function at HDFC Bank in 1994Cross Industry experience of 25 years from banking, insurance,investments, asset finance, among othersMBA’s from the University of North Carolina-USA (Finance) magna cumlaudéMBA from University of Puné-India.M.Sc degree from M.S.University of Baroda, IndiaFRM charter holderCertifications from NASD, NC Dept of Insurance & others.
  9. 9. Range of programsRange of programsRange of programsRange of programsGamma Advisory Services April 20139Treasury – FunctionalTrainingTreasury Review ProgramMarket & Counterparty RiskAsset & Liability ManagementCredit RiskRisk Review & Advisory ServicesMiscellaneous: Financial ModelingMiscellaneous: Building Blocks
  10. 10. Advanced Programs in Risk ManagementAdvanced Programs in Risk ManagementAdvanced Programs in Risk ManagementAdvanced Programs in Risk Management ----A PresentationA PresentationA PresentationA PresentationGamma Advisory Services April 2013Pravin ShirnameScheduled for 2013-1410
  11. 11. Advanced Programs in Risk ManagementAdvanced Programs in Risk ManagementAdvanced Programs in Risk ManagementAdvanced Programs in Risk ManagementGamma Advisory Services April 2013Who should attend from banks, regulatoryagencies, software firmsrisk analyticsrisk managementrisk auditfinancesystem specialists11
  12. 12. Advanced Programs in Risk ManagementAdvanced Programs in Risk ManagementAdvanced Programs in Risk ManagementAdvanced Programs in Risk ManagementGamma Advisory Services April 2013Program structure:Text material or presentations, covering taxonomy of riskmodels, with focus on model risk elementsSpreadsheet demonstrations of all models coveredSoftware based demonstration for simulation basedmodelsTest cases workoutRisk on risk models covered in special topics12
  13. 13. Market RiskMarket RiskMarket RiskMarket RiskGamma Advisory Services April 2013Advanced Program in Market RiskGeneral Policy and ControlsInternal OrganisationInternal process of riskMarket data controlsPosition controlsModel risk managementBacktesting policyStress testing policy13
  14. 14. Market RiskMarket RiskMarket RiskMarket RiskGamma Advisory Services April 2013Advanced Program in Market RiskParametricValue at RiskAggregate Measures usedMapping methods for cash flowsProduct wise applicationApplying methods for non-normal variables14
  15. 15. Market RiskMarket RiskMarket RiskMarket RiskGamma Advisory Services April 2013Advanced Program in Market RiskHistorical SimulationAlternative weighting methodsAlternative simulation methodsScaling HistoricalVaRAdjusting for non-normality15
  16. 16. Market RiskMarket RiskMarket RiskMarket RiskGamma Advisory Services April 2013Advanced Program in Market RiskMonte Carlo SimulationComponents of VaR processGenerating random numbersAlternatives for MCS VaRnormal random variables, factor models, decomposition,multi-steps, non-normal simulation, copula methods,principal components based methodsImproving MCSVaRDemonstrating simulation software16
  17. 17. Market RiskMarket RiskMarket RiskMarket RiskGamma Advisory Services April 2013Advanced Program in Market RiskPreview of Market Risk in the futureAssessing capital for market riskAssessing economic riskRisk management applicationOther applications of market risk measures17
  18. 18. CounterpartyCounterpartyCounterpartyCounterparty RiskRiskRiskRiskGamma Advisory ServicesApril 2013Advanced Program in Counterparty RiskProduct ReviewFX Product ReviewProducts from vanilla structures, forward structures, Barriersoptions, Binary options, Faders, Accumulators, Average rateoptions, Compound options, among a wide range of FXproductsInterest rate Product ReviewProducts from vanilla swaps, In arrear swaps, Quanto swaps,Cancellable swaps, Swaptions, Caps and Floors, CMS, Rangeaccrual swaps, among a wide range of Interest rate products18
  19. 19. CounterpartyCounterpartyCounterpartyCounterparty RiskRiskRiskRiskGamma Advisory ServicesApril 2013Advanced Program in Counterparty RiskCredit risk in treasury operationsDefinitions and ExposuresCredit Processes andApprovalsQuantification of credit exposureQuantification of credit exposures, CVA, DVA, FVARisk reduction methodsCapital Assessment in Basle I,II,IIIBackTestingStressTesting19
  20. 20. CounterpartyCounterpartyCounterpartyCounterparty RiskRiskRiskRiskGamma Advisory Services April 2013Advanced Program in Counterparty RiskCounterparty RiskTemplatesProduct categoriesAnalytical and simulation tools for exposuresCVA and other adjustmentsWrongWay RiskRisk analysis and reporting20
  21. 21. Counterparty RiskCounterparty RiskCounterparty RiskCounterparty RiskGamma Advisory Services April 2013Advanced Program in Counterparty RiskPreview of Counterparty Risk in the futureAssessing capital for counterparty riskAssessing economic riskRisk management applicationOther applications of counterparty risk measures21
  22. 22. Asset Liability ManagementAsset Liability ManagementAsset Liability ManagementAsset Liability ManagementGamma Advisory ServicesApril 2013Interest rate risk measurement & managementReview of IRR : components, management process,management structureDefining and measuring IRR : rate volatility, cash flowimpacts, embedded options+GapAnalysis : Processes, evaluating IRR+Income simulation: Processes, evaluating IRR+22
  23. 23. Asset Liability ManagementAsset Liability ManagementAsset Liability ManagementAsset Liability ManagementGamma Advisory ServicesApril 2013Interest rate risk measurement & managementDuration and Convexity based simulation : Processes,evaluating IRR+EconomicValue Simulation: concept, process,evaluating IRR+Measuring risk of indeterminate maturity and depositvariants : alternate methods, estimating rate changes+Measuring risk of loans & investments : IRR ofmortgage loans, assessing prepayment and other risks23
  24. 24. Asset Liability ManagementAsset Liability ManagementAsset Liability ManagementAsset Liability ManagementGamma Advisory ServicesApril 2013Interest rate risk measurement & managementModeling of rate change type of scenarios : types of ratechanges, models of rate changes, models of rates,estimating parameters of models+ImplementingAL models: key aspects of AL Models thatneed to be evaluated, advanced modeling features+Model risk management: assumptions, managing models,testing+Additional risk aspects: cross impacts, other riskimpacts+24
  25. 25. Asset Liability ManagementAsset Liability ManagementAsset Liability ManagementAsset Liability ManagementGamma Advisory ServicesApril 2013Liquidity risk measurement & managementDefinition of Liquidity RiskLiquidity risk measurement: ratios, stock & flow measures,liquidity risk gap analysisStress analysis: liquidity risk categories, stress levelsStress testing: components, process of stress testingManaging asset liquidity risk: types, estimation of liquiditybuffer, managing assets for liquidityManaging liability liquidity risk: types, estimation of liquidityrisk, managing assets for liquidity25
  26. 26. Asset Liability ManagementAsset Liability ManagementAsset Liability ManagementAsset Liability ManagementLiquidity risk measurement & managementMitigating liability liquidity risk under stress: strategy,tactics, testingLiquidity risk pricing: components of risk, methods,usage in FTPContingency for liquidity risk: components, frameworkof contingency plansLiquidity risk controls: risk limits, reporting, genericliquidity risk policyGamma Advisory ServicesApril 201326
  27. 27. Asset Liability ManagementAsset Liability ManagementAsset Liability ManagementAsset Liability ManagementGamma Advisory ServicesApril 2013ALM IRR policies, management, limits & systemsALM IRR policy, structure, setting limits, risk appetite+ALM management, implementation+Back-testingManaging IRR without derivatives+Managing IRR with derivatives+Liquidity risk policyManaging liquidity risk and contingenciesALM system requirements +Review of current regulatory scope forALM27
  28. 28. CreditCreditCreditCredit RiskRiskRiskRiskGamma Advisory ServicesApril 2013Credit AnalysisCredit analysis process & conceptsThe five C’s of creditOverview of financial statementFinancial analysis & performance assessmentVariantsCredit analysis for individualsCredit analysis of financial institutions (different types)28
  29. 29. Wholesale CreditWholesale CreditWholesale CreditWholesale Credit RiskRiskRiskRiskGamma Advisory ServicesApril 2013Wholesale Credit Risk ManagementCredit approval process : from segmentation to rating,documentation, monitoring, remedial action etcCredit risk management process: from risk capacity,capital allocation, managing and reportingCredit risk organisation structureCredit risk auditCredit risk rating modeling approaches29
  30. 30. Wholesale CreditWholesale CreditWholesale CreditWholesale Credit RiskRiskRiskRiskGamma Advisory ServicesApril 2013Wholesale Credit Risk ManagementCredit risk valuation and loan pricingPortfolio credit risk modelsRisk adjusted performanceRegulatory capitalFuture requirements30
  31. 31. Retail CreditRetail CreditRetail CreditRetail Credit RiskRiskRiskRiskGamma Advisory ServicesApril 2013Credit Scoring and Response ModelingObjectives of using scoringOverview of credit scoring and riskReview of building blocks for statistics & mathematics forscoringDevelopment process and methods for credit scoringValidation & performance analysisImplementation, monitoring & review31
  32. 32. Retail CreditRetail CreditRetail CreditRetail Credit RiskRiskRiskRiskGamma Advisory ServicesApril 2013Credit Risk ManagementOverview of products, markets, roles, organisation & legalframeworkMarketing : product design & strategyCredit risk management : governance, strategy, systems,fraud, capital & provision+Operational management of credit: from application, accountmanagement , collections +Portfolio analysisManagement & OrganisationRegulation, Compliance perspectives32
  33. 33. “He who loves practice without theory is like the sailor whoboards ship without a rudder and compass and neverknows where he may be cast”Leonardo da VinciGamma Advisory Services April 201333
  34. 34. Thank YouThank YouThank YouThank YouGamma Advisory Services April 2013E-Mail:gammaadvisory@gmail.comWeb:http://gammaadvisoryservices.weebly.com/34
  35. 35. Pravin ShirnameThe EndGamma Advisory Services April 201335

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