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Gamma Advisory Services 2014/03

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Risk training, technology and advice

Risk training, technology and advice

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  • 1. Gamma Advisory Services March 20141 Gamma Advisory Services Risk Training, Technology & Advise
  • 2. A review of risk training, technology and advisory services Gamma Advisory Services March 2014 Pravin Shirname 2
  • 3. “The only skill that will be of lasting value in the 21st century will be the skill of learning new skills. All other skills will become obsolete with the passing of time” Peter Drucker Gamma Advisory Services March 20143
  • 4. Background Gamma Advisory Services March 20144  Pravin Shirnamé, Principal Advisor, Gamma Advisory Services:  Set up Gamma Advisory Services in 2010 aimed at improved Risk Management Practices  Former head of the Market Risk function at HDFC Bank, India.  Part of core team that set up Risk function at HDFC Bank in 1994  Cross Industry experience of 25 years from banking, insurance, investments, asset finance, among others  MBA’s from the University of North Carolina-USA (Finance) magna cum laudé  MBA from University of Puné-India.  M.Sc degree from M.S.University of Baroda, India  FRM charter holder  Certifications from NASD, NC Dept of Insurance & others.
  • 5. Objectives Gamma Advisory Services March 20145  Promote the use of best of current practices in risk management  Taxonomy of methodologies  Link formal theory to all risk applications  Training spectrum of staff in across all functions  Private certification of staff  Cater to all levels: review, vocational & advanced as well as for staff at entry, specialist, senior & board levels
  • 6. Services Gamma Advisory Services March 20146  Programs: Reviews: review of key components Vocational: teaching, practice & testing Advanced review of cutting edge industry practices & research covering all major areas of risk  Risk advice on policy and practices
  • 7. Users Gamma Advisory Services March 20147  New hires, functional specialists and top management (based on program)  Cross functional users  Front, Middle, and Back Offices  Risk, Analytics  Information Technology (systems, programming, testing & support)  Finance  Risk audit, compliance  Legal
  • 8. Delivery Mechanism Gamma Advisory Services March 20148  Based on specific program Seminar or Classroom Reading or Review matter Presentation Computer aided demonstration Spreadsheet exercises Testing for vocational programs
  • 9. Range of programs Gamma Advisory Services March 20149  Treasury Certification Program  Treasury Review Program  Treasury Review for Relationship Managers @  Advanced Risk Reviews  Market & Counterparty Risk  Asset & Liability Management  Credit Risk @  Risk Review & Advisory Services  @= under preparation
  • 10. Range of programs Gamma Advisory Services March 201410  Advanced Reviews  Model Risk Management  Validation Methods for Risk Models  Stress testing of all risks @  Economic Capital & Capital Planning @  Risk Policies  Building Blocks @= under preparation
  • 11. Certification Programs Gamma Advisory Services March 201411
  • 12. Certification Program (ITTP) Gamma Advisory Services March 2014  Contents  A four module coverage ensuring a comprehensive review of all major facets of treasury business A. Treasury products and pricing B. Risk controls and capital assessment C. Documentation (for derivatives) D. Accounting 12
  • 13. Certification Program (ITTP) Gamma Advisory Services March 2014  Who should attend ?  The treasury professional from treasury front office, mid-office, risk management, back-office, audit, financial control, legal, and system specialists.  Each function is allocated modules based on work area specialization. Modules(1&2) on products, risk and capital assessment is common to all functions 13 Updated Annually
  • 14. Certification Program (ITTP) Gamma Advisory Services March 2014  Structure  Program structure: Workshop & Certification  Components: Text material, presentations with spreadsheet demonstrations, Case studies  Customised reading material of over 1200+ pages spanning 24+sections along with 1800+ presentation slides review material for each as well as over 350+spreadsheets examples. Range of case studies provided.  Candidate Testing 14
  • 15. Certification Program (ITTP) Gamma Advisory Services March 2014  Modules & Sections: A. Products and Pricing  Introduction  Building Blocks  Money Markets  Forward Rate Agreements  Interest rate futures  Bonds  Repurchase Agreements  Bond Futures  Yield Curves 15
  • 16. Certification Program (ITTP) Gamma Advisory Services March 2014  Modules & Sections: A. Products and Pricing  Foreign Exchange  Currency Options  Interest rate Swaps & other derivatives  Mutual Funds  Credit Derivatives  Securitisation  Gold and Commodities 16
  • 17. Certification Program (ITTP) Gamma Advisory Services March 2014  Modules & Sections: B. Risk control and Capital Assessment  Treasury Market Risk  Treasury Credit Risk  Asset Liability Management  Capital for Market and Credit Risk  Cases 17
  • 18. Certification Program (ITTP) Gamma Advisory Services March 2014  Modules & Sections : C. Documentation for Derivatives  Documentation for derivatives  Documentation Process  1992 ISDA Master  2002 ISDA Master  Default and Insolvency  Tax withholding  Credit Derivatives  Credit Support Documentation 18
  • 19. Certification Program (ITTP) Gamma Advisory Services March 2014  Modules & Sections : D.Accounting for treasury business  Accounting and Controls  Money Markets  Interest rate instruments  Foreign Exchange and options  Credit Derivatives  Equities  Hedge accounting 19
  • 20. Certification Program (ITTP) Gamma Advisory Services March 2014  Modules & Sections : Preparatory  Spreadsheets in Finance  Review of operations, formulas and functions, naming, charting,  Statistical tools: Description, Distribution analysis, Regression  What-if analysis: sensitivity analysis with tables  Multipage systems and lookups  Databases : Sorting & filtering, data forms, subtotal, pivot tables  Financial and Statistical functions  Using Solver and goal seek for finance 20
  • 21. Certification Program (ITTP) Gamma Advisory Services March 2014  Modules & Sections : Preparatory (2)  Financial Modeling with spreadsheets  Statistical analysis of time series data  What-if analysis: sensitivity analysis with tables  Financial and Statistical functions  Applications using Solver and goal seek for yield curve and risk  Matrices for risk assessment  Simulation techniques : random generators, bootstrapping, generating random paths, monte carlo simulation methods  Utilities: lookup (one and two way), interpolation 21
  • 22. Treasury Review Program (TRP) Gamma Advisory Services March 201422
  • 23. Review Programs (TRP) Gamma Advisory Services March 2014  Program structure A. Banking & Economy B. Trade Products & Processes C. Analysis & Reporting D. Structure & Maintenance 23
  • 24. Review Programs (TRP) Gamma Advisory Services March 2014  Who should attend ?  The treasury professional from treasury front office, mid-office, risk management, back- office, audit, financial control, legal, & system specialists.  Background neutral  New treasury entrants or laterals and senior management review  Overview of treasury process 24
  • 25. Review Programs : (TRP) Gamma Advisory Services March 201425 Closure Transaction Maturity Trade Stages Trade stages Trade background Trade participants & Asset Categories Accounting P&L Attribution Counterparty Risk Market Risk (C) Analysis & Reporting Trade Organisation Asset Holding Trade Administration Market & non- market data (D) Structure & Maintenance (B) Products & Processes Money & Banking Money Demand & Supply Central Bank & Policy Bank roles (A) Background
  • 26. Review Programs (TRP) Gamma Advisory Services March 2014 A. Banking & Economy Background  Financial System  Markets  Functions of Financial Systems  Institutions  Monetary Economics  Market Behaviour  Central Bank role and activities  Macroeconomic Review  Economics of international trading  Bank Management 26
  • 27. Review Programs (TRP) Gamma Advisory Services March 2014 B. Products  Traded Products Review  Money Markets  Forward Rate Agreements  Interest Rate Futures  Bonds  Repos  Foreign Exchange  Options  Interest Rate Derivatives  Credit Derivatives  Securitisation 27
  • 28. Review Programs (TRP) Gamma Advisory Services March 2014 B. Processes  Processes 1. Trading background 2. Trade Ticket 3. Stages of a trade 28
  • 29. Review Programs (TRP) Gamma Advisory Services March 2014 C. Analysis and Reporting  Accounting: concepts of realised and un- realised profit, accrued interest  P&L Attribution : uses and process  Counterparty risk : Credit , pre-settlement & settlement risk, mitigation  Market Risk: positions, gaps, stop loss, ageing of holdings, sensitivities, value at risk , stress testing, back testing Listing 29
  • 30. Review Programs (TRP) Gamma Advisory Services March 2014 D. Structure & Maintenance  Trade Organisation: Entities, counterparties, books, static data  Departmental Organisation: Roles of various departments  Asset holding : Holdings, value, reconciliation, etc  Trade administration: rates, cashflows etc.  Market and non-market data : data types, users, errors , management  Systems : Overview of system functionality, examples Listing 30
  • 31. Treasury Review for Relationship Managers @ Gamma Advisory Services March 201431
  • 32. Review Programs (TRRM) Gamma Advisory Services March 2014  Program Structure A. Banking & Economy B. Traded Products C. Risk Management 32
  • 33. Review Programs (TRRM) Gamma Advisory Services March 2014  Who should attend ?  The corporate, middle market and other non- treasury relationship managers along with non-treasury operations.  Background neutral  New entrants or laterals and senior management review  Overview of treasury products and risk 33
  • 34. Review Programs (TRRM) Gamma Advisory Services March 2014 A. Banking & Economy Background  Financial System  Markets  Functions of Financial Systems  Institutions  Monetary Economics  Market Behaviour  Central Bank role and activities  Macroeconomic Review  International Trade  Bank Management 34
  • 35. Review Programs (TRRM) Gamma Advisory Services March 2014 B. Products  Traded Products Review  Money Markets  Forward Rate Agreements  Interest Rate Futures  Bonds  Repos  Foreign Exchange  Options  Interest Rate Derivatives  Credit Derivatives  Securitisation 35
  • 36. Review Programs (TRRM) Gamma Advisory Services March 2014 C. Risk Management  Counterparty risk : Credit risk , pre- settlement risk, settlement risk, mitigation  Market Risk: positions, gaps, stop loss, ageing of holdings, sensitivities, value at risk , stress testing, back testing  Corporate Risk: types of exposures, risk profile, quantifying risk, strategies, managing risk 36
  • 37. Advanced Reviews in Risk Management Gamma Advisory Services March 201437
  • 38. Advanced Reviews Gamma Advisory Services March 2014  Who should attend from banks, regulatory agencies, software firms  risk analytics  risk management  risk audit  finance  system specialists 38
  • 39. Advanced Reviews Gamma Advisory Services March 2014  Program structure  Text material or presentations, covering taxonomy of risk models, with focus on model risk elements  Spreadsheet demonstrations of all models covered  Software based demonstration for simulation based models  Test cases workout  Risk on risk models covered in special topics 39
  • 40. Advanced Reviews: Market Risk (1) Gamma Advisory Services March 2014  Advanced Reviews of Market Risk Controls  Organisation, Process, Policy and Controls  Parametric Value at Risk  Aggregate Measures  Mapping Cash flows  Product wise application  Applying to non-normal variables 40
  • 41. Advanced Reviews: Market Risk (2) Gamma Advisory Services March 2014  Advanced Reviews of Market Risk Controls  Historical Simulation  Alternative weighting methods  Alternative simulation methods  Scaling risk measures  Scaling and adjusting for non-normality 41
  • 42. Advanced Reviews: Market Risk (3) Gamma Advisory Services March 2014  Advanced Reviews of Market Risk Controls  Monte Carlo Simulation  Components  Generating random numbers  Alternatives for MCS VaR  normal random variables, factor models, decomposition, multi-steps, non-normal simulation, copula methods, principal components  Improving MCS VaR  Demonstrating simulation software 42
  • 43. Advanced Reviews: Market Risk (4) Gamma Advisory Services March 2014  Advanced Reviews of Market Risk Controls  Preview of Market Risk in the future  Assessing capital for market risk  Assessing economic risk  Risk management application  Other applications of market risk measures 43
  • 44. Advanced Reviews: Counterparty Risk Gamma Advisory Services March 2014  Advanced Reviews of Counterparty Risk Controls  Product Review : FX and Interest Rates  Credit risk in treasury operations  Risk reduction  Quantification of credit exposures, CVA, DVA, FVA  Capital Assessment with Basle I, II and III  Credit Risk Templates using analytical and simulation tools (exposure, credit risk)  Model controls  Risk analysis and reporting 44
  • 45. Advanced Reviews : Wholesale Credit @ Gamma Advisory Services March 2014  Wholesale Credit risk management  Components of credit  Financial statement review  Credit analysis of different entities  Credit approval process  Ratings  Credit organisation  Credit management, reporting & remediation  Credit modeling  Credit risk valuation and loan pricing  Portfolio credit risk assessment  Performance evaluation  Regulatory capital 45
  • 46. Advanced Reviews : Retail Credit (1) @ Gamma Advisory Services March 2014  Retail credit risk management  Review of credit markets  Marketing  Credit risk management  Operational Management of credit  Portfolio analysis  Management & Organisation 46
  • 47. Advanced Reviews : Retail Credit (2) @ Gamma Advisory Services March 2014  Credit Scoring & Response Modeling  Objectives of using scoring  History of credit data  Overview of credit scoring  Review of techniques  Development and management of credit scoring 47
  • 48. Advanced Reviews : ALM (1) Gamma Advisory Services March 2014  Asset Liability Management  Interest rate risk measurement & management  Review of IRR  Definition and assessments  Gap Analysis  Income simulation  Duration & convexity based IRR  Economic Value Simulation  Measuring IRR of different products  Rate estimation  Use of models for AL  IRR management review 48
  • 49. Advanced Reviews : ALM (2) Gamma Advisory Services March 2014  Asset Liability Management  Liquidity risk measurement & management  Components  Measures  Scenario analysis  Stressed liquidity  Liquidity from assets  Liquidity from liabilities  Methods for managing LR  Sensitivity tests  Liquidity costs  Intraday liquidity risk  Contingency planning 49
  • 50. Advanced Reviews : ALM (3) Gamma Advisory Services March 2014  Asset Liability Management  ALM Policies, Organisation, Risk Limits & Systems  ALM decision making  Managing IRR without derivatives  Managing IRR with derivatives  Managing asset mix  IRR policies and controls  LR policies and controls  Systems 50
  • 51. Advanced Reviews : ALM (4) Gamma Advisory Services March 2014  Asset Liability Management  Other topics  Review of regulations  Funds Transfer Pricing  Liquidity Transfer Pricing 51
  • 52. Special Topics (1) Gamma Advisory Services March 2014  Model Risk Framework  Overview of Model Risk Management  Model development, implementation and use  Model evaluation framework  Governance Framework  Model Risk Validation  Procedures, Tools for validation  Review of validation for CR, MR, CCR and ALM 52
  • 53. Special Topics (2) Gamma Advisory Services March 2014  Stress testing @  Governance Framework  Stress testing Market Risk  Stress testing Counterparty Exposures  Operational Risk stress testing framework  Stress testing rating models  Stress testing retail loan portfolios  Stress testing corporate credit portfolios  Stress testing operational risks  Stress testing economic capital  Liquidity risk stress testing  Data requirements  Scenarios for macroeconomic applications  Regulatory applications 53
  • 54. Special Topics (3) Gamma Advisory Services March 2014  Economic Capital & Capital Planning @ 54
  • 55. Other Services Gamma Advisory Services March 201455
  • 56. Reviews & Advisory Services (1) Gamma Advisory Services March 2014  Risk Policies  bank risk management process  risk management  credit risk  loan  stress testing  concentrations of risk  interest rate risk  liquidity risk  market risk  transaction (operational) risk  country risk 56
  • 57. Reviews & Advisory Services (2) Gamma Advisory Services March 2014  Risk Policies  compliance risk  strategic risk  electronic banking risk  environmental risk  legal risk  custody services risk  identity theft risk  operational risk  model risk  enterprise risk  economic and capital planning  + 57
  • 58. Quantitative Skills Gamma Advisory Services March 2014  Building blocks for Risk Modeling  Mathematics, Algebra and Calculus for Finance  Probability and Statistics  Regression Models  Classical Models of Volatility and Correlation  Introduction to GARCH models 58
  • 59. “He who loves practice without theory is like the sailor who boards ship without a rudder and compass and never knows where he may be cast” Leonardo da Vinci Gamma Advisory Services March 201459
  • 60. Thank You Gamma Advisory Services March 2014  E-Mail:  gammaadvisory@gmail.com  Web:  http://gammaadvisoryservices.weebly.com 60
  • 61. Pravin Shirname The End