Counterparty Risk, Credit Exposure and CVA

A practical 3-day course covering collateral management and counterparty risk. Presented by Dr. Jon Gregory THE COURSE This course explains and describes counterparty risk and the quantification and management of CVA. The ideas are built up sequentially and workshops are used to develop the key ideas including simulation of exposure, the impact of risk mitigants and calculating CVA. Attention is also given to the impact of recent regulatory changes under Basel III on the management of counterparty risk and CVA - in particular CVA VAR and Central Counterparties. Participants will be able to take away all worked examples and additional exercises and models implemented using Excel functions and macros. All delegates receive a copy of Jon's new book; "Counterparty Credit Risk: The new challenge for global financial markets"(2nd Edition) PRIOR KNOWLEDGE Numerate background (basic) Knowledge of derivatives products Basic knowledge of Microsoft Excel WHO SHOULD ATTEND? Credit traders Derivatives traders and marketers Risk managers and credit risk practitioners Structurers IT Middle office Senior management Quantitative researchers Product control Portfolio managers Operations / Collateral management

About LFS
London Financial Studies is a specialist teaching resource that concentrates exclusively on capital markets. We offer individuals, teams and companies a unique and expert teaching resource that combines theoretical understanding with practical experience. LFS is well known for its personal approach and the economic value that it delivers to clients.

Counterparty Risk, Credit Exposure and CVA

DAY I
Introduction A history of counterparty risk and CVA The OTC derivatives market Credit value adjustment Regulation Credit exposure Credit limits Defining credit exposure Expected exposure (EE), potential future exposure (PFE) and expected positive exposure (EPE) Typical exposure profiles Mitigating credit exposure Example: examples of EE, PFE, EPE and the impact of netting and collateral Methodology for simulating exposure Simple approaches Overview of methodology Example Aggregation and the impact of netting Incremental exposure Marginal exposure Example: quantifying the impact of netting on credit exposure Quantifying credit exposure in the presence of risk mitigants Impact of terminations / resets Call and return calculations The close-out period Post processing Impact of collateral on exposure - examples Example: implementing collateral calculation to calculate call and return amounts and simulating the impact of collateral on exposure

The Teacher
Dr Jon Gregory has over ten years experience as a practitioner in quantitative finance. From 1995 to 1997 he worked in the Fixed Income division of Salomon Brothers. From 1997 to 2005 he was with BNP Paribas and worked on many projects across the interest rate, equity, credit, insurance and risk management divisions. From 2005 until 2008 he was global head of credit analytics at Barclays Capital and responsible for a team of around 30 researchers globally. Jon has published a number of papers and articles on risk management, modelling and credit derivatives subjects and is a regular speaker at international conferences. He was a co-author of the book "Credit: A Complete Guide to Pricing, Hedging and Risk Management", nominated in 2001 for the Kulp-Wright award for the most significant text in risk management and insurance. He holds a PhD from Cambridge University.

Counterparty Risk, Credit Exposure and CVA

DAY II
Default and credit spreads Defining default probability Historical data Market-implied default probabilities Examples of credit curves Mapping methods Credit spreads Recovery rates Example: calculating default probability from CDS quotes / analysis of mapping methods. Portfolio Counterparty Risk and Basel III Impact of counterparty risk at the portfolio level The alpha factor Basel II definitions and EEPE Basel III and CVA VAR Workshop: computing the alpha factor for various difference credit portfolios Central Counterparties Rationale Multilateral netting The mechanics of trading through a CCP Margining and the loss waterfall Important CCP questions Are CCPs a good idea? Workshop: computing the alpha factor for various different credit portfolios Credit value adjustment (CVA) The role of CVA Example - the CVA of a swap CVA formulas CVA and risk neutrality Examples Incremental and marginal CVA Example: computing CVA using approximate and more accurate methods. Computing incremental CVA

Our work is built on four complementary key values

Practical application What we teach is soundly based in current best practice. Our teachers have extensive practical experience in relevant capital markets. Intellectual clarity Our teachers are first class communicators and acknowledged experts in their fields. They combine extensive practical experience with profound theoretical understanding. As skilled communicators, they get the message across quickly and effectively. Course exercises deliver effective practical learning that participants remember long after leaving the classroom. Personal approach We try to understand the needs of each person and structure courses and packages of real benefit to them. All our teaching groups are small enough to enable individual needs to be assessed and met continually. Economic value We understand the commercial environment in which our clients operate. What we teach them delivers tangible benefits to their personal performance and the bottom line of their companies.

Counterparty Risk, Credit Exposure and CVA

DAY III
Complexities of CVA CVA for collateralised positions Bilateral CVA (DVA) How to monetise DVA Correlation and closeout assumptions Should you use DVA? Example: computing CVA in the presence of netting and collateral and computing DVA Funding and valuation OIS discounting Funding costs and FVA/LVA Funding and DVA Optimisation of CVA, DVA, funding and regulatory capital Example: example calculation of FVA (LVA)

Global markets are fast moving, complex and evolving continuously. High-quality professional education is vital to maintain performance.

Tight Focus
Our expertise is in capital markets. That is what we concentrate on. We offer courses and packages on a wide range of topics in this important and complex area. This tight focus enables us to deliver teaching that is uniquely effective and useful.

Theory and practice

The professional and personal qualities of our course leaders are crucial: effective learning can only be delivered by exceptional teachers. At London Financial Studies we are able to attract prominent practitioners and academics all of whom have a clear and thorough grasp of their subjects and wide, practical experience. They are all expert communicators with the ability to impart their knowledge in a clear and engaging way.

Wrong-way risk Evidence and examples of wrong-way risk Approaches for general wrong way risk Specific wrong way risk - examples for interest rates, FX, commodities and options Credit derivatives Counterparty risk and the failure of CDOs Example: simple wrong-way risk model and simple CDS counterparty risk calculation Managing CVA volatility How to manage CVA Static hedging Dynamic hedging and CVA Greeks Cross gamma Hedging and DVA Hedging in practice

Booking Form
General Course Booking Conditions

The course fee is 3435 (1145 per day) plus VAT* and includes lunch, refreshments, full documentation, all relevant Excel macros and spreadsheets and access to our on-line Library. An early booking discount of 10% is available for bookings made more than one month before the start of the course. Multiple booking discounts are also available. Invoices will be sent out with payment instructions and are payable by the earlier of 14 days from receipt or the first day of the course. Counterparty Risk, Credit Exposure and CVA (Please fill in 1 form for each booking) PLEASE WRITE CLEARLY IN BLOCK CAPITALS Course Dates:

Cancellations An administration fee of 15% of the full brochure price will be charged for written cancellations received more than 20 working days prior to the start of the course. Delegates who request cancellation 20 working days or less before the course start date, or who do not attend, will be charged the full course fee. In the event of delegates not being able to attend, substitutes are welcome at any time for no extra charge. Postponements Delegates may make one postponement of a course place from the date of first booking to the next available date free of charge provided that the postponement request is received more than 20 working days before the start of the course. All other postponements will be subject to a fee of 15% of the full brochure price. *VAT For courses run in the United Kingdom, VAT at 20% will be charged according to UK law. Disclaimer London Financial Studies reserves the right to cancel or postpone courses for reasons beyond its control. Under all circumstances the companys liability is limited to a full refund of the course fee paid. Intellectual Property Notice The intellectual property rights in all of the readings, slides, spreadsheets and other material provided as part of or in relation to the course being booked (the material) are owned either by London Financial Studies Ltd (LFS) or by third parties. The material not owned by LFS is reproduced under the terms of a CLA license or with the permission of the owners. Further reproduction of any of the material is not allowed without the specific permission of either LFS or other owner of the intellectual property rights. Law and Jurisdiction These terms and conditions shall be governed by and construed in accordance with the laws of England and the parties agree to submit to the exclusive jurisdiction of the Courts of England and Wales.

Name:

Title:

Dr

Mr

Mrs

Ms

Company:

Job Title:

Department:

Phone:

E-mail:

Details of person to whom invoice should be sent:

Name:

E-mail:

Phone:

Job Title:

Payment Type:

Invoice

Credit Card

VAT Reg. number:

Address for Invoice:

Booking Code (if applicable):

I have read and accept the booking conditions on this page

Purchase Order:

Registration
To confirm your place, please return this booking form by fax to: +44 (0)20 7378 1062