Basel II Quantitative Masterclass

Transcription

1 Basel II Quantitative Masterclass 4-Day Professional Development Workshop East Asia Training & Consultancy Pte Ltd invites you to attend a four-day professional development workshop on Basel II Quantitative Masterclass. Course Programme The arrival of the Basel II Accord and the need for more thoroughness and visibility in managing risk are driving financial institutions to search for new systems and technology quantitative approaches that reduce exposure to unexpected, unwarranted credit, portfolio, operational and other risks. This program will provide technology resources and risk-management tools to precisely measure all types of risks, resulting in capital support acceptable to stakeholders, management, the board, and regulators. Who should take this seminar? Bank Regulators and Examiners, Credit Managers, Accountants, Corporate and Financial Consultants, Credit Analysts, Treasury Managers, Risk Analysts, Financial Analysts, Corporate Bankers, Investment Bankers, Corporate Lending Officers, Research and Ratings Personnel, Portfolio Managers, Venture Capital Executives, Consultants or anyone who is interested to answer two basic questions: Am I confident the tools and concepts I use to measure risks capital allocation, portfolio and individual exposures are conceptually sound, unequivocally current and empirically validated? What are the opportunity costs both institutionally and professionally if I lag behind? Pre-Requisite This a pragmatic course aimed at practitioners who must deal with regulators, board members or senior management. It does not require advanced mathematical expertise, but relies on at mid-level risk experience (at a minimum) and basic statistical concepts. Some knowledge of stochastic forecasting is helpful. Group case preparation in the evening is required Copyright East Asia Training & Consultancy Pte Ltd. All Rights Reserved 1

2 What will you learn? Fee You will know how to employ very powerful risk-reduction and riskmanagement technique called real options analysis that are starting to be used by bank risk managers to allocate capital and mitigate risk Learn to hedge against market risk utilizing sophisticated tools like option pricing (Real Options SLS software), risk-simulation techniques (Risk Simulator software), as well as the Basel II Modeling Toolkit Know how to use Option Pricing Theory to extract credit information embedded in the equity markets Determine well-reasoned loss given default (LGD) and loan loss reserves Employ Monte Carlo simulation, stochastic optimization to identify and track credit default migration Master advanced cash flow analysis and learn to prevent cash flow information gaps Reduce operating risk in your organization by creating algorithmically driven, interactive, Basel II compliant risk rating systems Learn to replicate the credit rating of collateralized debt obligations and portfolio credit linked notes Understand compliant and best practices of the Basel II Accord You will perform quantitative risk analysis and simulations employing the Basel II Toolkit 26 distributions, VaR, customized simulations for determining market, stochastic modeling, operational and credit risk, and many more. In addition you will create and solve your own custom options (closed-form models, partial differential models and multinomial, binomial, trinomial lattices) using the latest and most powerful tools available to deal with risk management and capital allocation best practices. The fee covers extensive course materials and databases, luncheons, morning and afternoon tea/coffee breaks, refreshments, receptions and the opportunity to meet and network with banking, finance, risk, compliance professionals from various industries in Asia. Copyright East Asia Training & Consultancy Pte Ltd. All Rights Reserved 2

3 Hours: 9:00 am - 6:00 pm. Morning and afternoon tea/coffee breaks with snacks (10am and 15:00pm). Lunch will be served (12:00 noon). Registration The number of participants is restricted. Please register early to guarantee your place. Please complete the official registration form and fax or it to us at administrator@eastasiatc.com.sg to reserve your place. Confirmation will only be made upon receipt of payment. Further instructions will be sent to confirmed participants. MAS Financial Sector Development Fund (FSDF) Participants may be eligible for Financial Sector Development Fund (FSDF) support on a case by case basis. Interested applicants should submit their applications to the FSDF Secretariat directly. For enquiries, please contact the FSDF secretariat at or via at fsdf@mas.gov.sg. You may use the printable MAS FSDF application form in Word format posted on our website. Please submit your applications to the FSDF Secretariat directly at least 6 weeks prior to the commencement of the course. Course Outline Day 1 Topic 1 Introduction: Distance to Default Infrastructure Default probability, loss given default, migration risk Moody s-kmv distance to default formula Transforming distance-to-default calculation to expected default frequencies Topic 2 Cash Flow Modeling and Analysis Developing a banker s cash flow model Identifying accounting shenanigans dealing with and curing a banker s headache, the control sheet and reconciliations Copyright East Asia Training & Consultancy Pte Ltd. All Rights Reserved 3

4 Case Study: An analysis of Enron s Cash Flow statements to learn what bankers should have discovered but didn t Topic 3 Option Pricing Concepts Equity values, loan pricing and risk management Avoiding errors in loan pricing Volatility and debt/equity values Finding probabilities that loans will default Quantifying the trade-off between risk & pricing Loan yields associated with the volatility of borrowers percentage returns Case Study Petroleum Development Corporation Part 1: Option Based Facility IRR; This operation is engaged in oil and natural gas extraction. Delegates evaluate put/call deal pricing structure. Part 2 requires risk rating this credit. Topic 4 Analytical Techniques Day 2 Static and dynamic sensitivities Bootstrap simulation, data fitting, and other decision analysis techniques Simulating Value at Risk models and using covariance VaR method Working with an entire range of results and confidence levels Stress testing determining the expected default frequency Time-series decomposition, Delphi expert method, Box-Jenkins ARIMA Multivariate regressions and stochastic processes Evaluating results and working with an entire range of results and confidence levels, and concepts of risk analytics Topic 5 Stochastic Optimization Identifying a borrower s optimal maximum/minimum values. Teams risk rate this operation engaged in oil and natural gas extraction. The values are subject to optimization constraints and requirements Copyright East Asia Training & Consultancy Pte Ltd. All Rights Reserved 4

5 How to handle nonlinear relationships using stochastic optimization to analyze financing of corporate restructurings Portfolio optimization and efficient allocation of resources and projects Case Study: An analysis of RI Furniture Corp. by optimizing revenue given constraints and uncertainty associated with a credit migration, valuations, running simulations in the background. Day 3 Topic 6 Introduction to Real Options Analysis Analytical comparison of financial options versus real options performed, including various methods used to solve financial and real options (closedform solutions, binomial and multinomial lattices, simulation) Custom options (closed-form models, partial differential models and multinomial, binomial, trinomial lattices) Small cases in real options analysis solved, including options to wait and defer, option to abandon, option to expand, option to contract, barrier options, sequential compound options Case Studies: Small cases in real options analysis are solved, including options to wait and defer, option to abandon, option to expand, option to contract, barrier options, sequential compound options, and others Topic 7 Real Options Analysis in Credit Proposals Real options to account to determine impact of positive uncertainty in estimating a borrower s project value Implementing real options analysis in credit/capital and portfolio. Industry applications Running simulations and optimization project with differing real options Case Studies: Some case studies on real options analysis in the industry will be discussed Copyright East Asia Training & Consultancy Pte Ltd. All Rights Reserved 5

6 Day 4 Topic 8 Risk Analysis and Basel II Toolkit Basel II Portfolio Operational and Credit Risk VaR Capital Adequacy Default Probability and Credit Risk Model for Basel II Pricing Debt with Stochastic Asset and Stochastic Interest External Credit Risk Rating Model (Debt Rating and Spreads Under Uncertainty) Internal Credit Risk Rating Model Topic 9 Compliant Interactive Credit Rating Systems: Algorithmic Solutions Structure Basel II compliant industry and/or sector-designed credit rating grid - algorithmic design Establish adequate reserves against loss, assign capital under Basel II, and determine expected loss and syndicate deals Construction of highly structured risk rating systems including project finance and real estate/construction Basel proposed three-year cumulative default rate benchmarks monitoring and trigger levels S&P assessment of 20-year average of three-year cumulative default rate Determination of reserve for project write-off Borrower and transaction risks Incorporating auditing functions into risk rating evaluating Case Study Petroleum Development Corporation Part 2 Risk Rating; Teams explain and defend risk rating, determine loss given default (LGD), loan loss reserve and reevaluate (Topic 3) put/call deal pricing structure. Topic 10 Portfolio Application: Replication - AAA Rating of Portfolio Credit Linked Note Replicate rating, structure, pricing, and valuation of this complex portfolio hedge Reinforce course disciplines: option pricing, simulation, interactive risk rating, etc Wrap up, summary and sources of further information. Copyright East Asia Training & Consultancy Pte Ltd. All Rights Reserved 6