Counterparty Risk Management

8.30 Registration and Coffee

9.00 Quantifying counterparty credit exposure

  • Counterparty risk vs. lending risk
  • Simulating price factor scenarios
  • Valuation of trades contingent on scenario
  • Netting agreements and aggregation
  • Margin agreements and collateralized exposure
  • Exposure profiles and credit limits

Speaker to be confirmed

10.30 Morning break

11.00 Case study: How to manage it ( including lessons learnt 2008/9)

  • Role, responsibilities, and performance measurement
  • Process: what happens, day-to-day
  • Handling defaults (lessons from Lehman / Icelandics)
  • Trends (focus on risk reduction opportunities)

David Murphy, Head of Counterparty Portfolio Management, DRESDNER BANK

12.30 Lunch

13.30 Modelling counterparty portfolio credit risk

  • Portfolio vs. single counterparty credit risk models
  • Modeling defaults
  • Modeling recoveries
  • Portfolio loss distribution by joint simulation of exposure and counterparty defaults
  • Incorporating wrong-way risk in the simulation model

Michael Pykhtin, Vice President, Risk Architecture, BANK OF AMERICA

15.00 Afternoon Break

15.30 Calculating and allocating economic capital for counterparty risk

  • Economic capital as the measure of portfolio credit risk
  • Replacing stochastic exposure with loan equivalent exposure
  • Methods of calculating economic capital
  • Methods of allocating economic capital
  • Pricing counterparty credit risk
    • Credit value adjustment (CVA) as the price of counterparty risk
    • CVA and risk neutral probability of default
    • CVA and risk neutral expected exposure
    • Accounting for wrong-way risk
    • Hedging counterparty credit risk

Michael Pykhtin, Vice President, Risk Architecture, BANK OF AMERICA

17.00 End of the Seminar
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