Gamma Advisory Services 2014/03

Gamma Advisory Services
March 20141
Risk Training, Technology & Advise

A review of risk training, technology
and advisory services
Gamma Advisory Services March 2014
Pravin Shirname
2

“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

Background
 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.

Objectives
 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

Services
 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

Users
 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

Delivery Mechanism
 Based on specific program
Seminar or Classroom
Reading or Review matter
Presentation
Computer aided demonstration
Spreadsheet exercises
Testing for vocational programs

Range of programs
 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

Range of programs
 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

Certification Programs

Certification Program (ITTP)
 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

 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

 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

 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

 Modules & Sections: A. Products and
Pricing
 Foreign Exchange
 Currency Options
 Interest rate Swaps & other derivatives
 Mutual Funds
 Credit Derivatives
 Securitisation
 Gold and Commodities
16

 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

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 Support Documentation
18

March 2014
 Modules & Sections : D.Accounting for
treasury business
 Accounting and Controls
 Money Markets
 Interest rate instruments
 Foreign Exchange and options
 Equities
 Hedge accounting
19

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

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

Treasury Review Program (TRP)

Review Programs (TRP)
 Program structure
A. Banking & Economy
B. Trade Products & Processes
C. Analysis & Reporting
D. Structure & Maintenance
23

 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

Review Programs : (TRP)
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

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

B. Products
 Traded Products Review
 Money Markets
 Interest Rate Futures
 Bonds
 Repos
 Options
 Interest Rate Derivatives
 Securitisation
27

B. Processes
 Processes
1. Trading background
2. Trade Ticket
3. Stages of a trade
28

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

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

Treasury Review for Relationship
Managers @

Review Programs (TRRM)
 Program Structure
A. Banking & Economy
B. Traded Products
C. Risk Management
32

 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

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

B. Products
 Traded Products Review
 Money Markets
 Interest Rate Futures
 Bonds
 Repos
 Options
 Interest Rate Derivatives
 Securitisation
35

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

Advanced Reviews in Risk
Management

Advanced Reviews
 Who should attend from banks,
regulatory agencies, software firms
 risk analytics
 risk management
 risk audit
 finance
 system specialists
38

Advanced Reviews
 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

Advanced Reviews: Market Risk (1)
 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

Controls
 Historical Simulation
 Alternative weighting methods
 Alternative simulation methods
 Scaling risk measures
 Scaling and adjusting for non-normality
41

March 2014
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

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

Advanced Reviews: Counterparty
Risk
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

Advanced Reviews : Wholesale Credit
@
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

Advanced Reviews : Retail Credit (1)
@
March 2014
 Retail credit risk management
 Review of credit markets
 Marketing
 Credit risk management
 Operational Management of credit
 Portfolio analysis
 Management & Organisation
46

Advanced Reviews : Retail Credit (2)
@
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

Advanced Reviews : ALM (1)
March 2014
 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

March 2014
 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

March 2014
 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

March 2014
 Other topics
 Review of regulations
 Funds Transfer Pricing
 Liquidity Transfer Pricing
51

Special Topics (1)
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

Special Topics (2)
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

Special Topics (3)
March 2014
 Economic Capital & Capital Planning @
54

Other Services

Reviews & Advisory Services (1)
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

Reviews & Advisory Services (2)
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

Quantitative Skills
 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

“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

Thank You
 E-Mail:
 gammaadvisory@gmail.com
 Web:
 http://gammaadvisoryservices.weebly.com
60

Gamma Advisory Services 2014/03

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