Saving Capital Under FTRB | Did You Know There Are Choices?
FRTB isn't just a bag of maths, like any regulation it gives firms choices to make about how they organise and run their trading desks. David Chen from TMX explains how in this free webinar.
The Fundamental Review of the Trading Book (FRTB) completes consultation this year, and moves into implementation from 2017 onwards. The outcome of FRTB is a new way to measure the capital usage of trading business, with big choices on the models used and the way you map your business into the models. Amongst the changes brought by FRTB are:
- A move away from regular VaR to VaR with Expected Shortfall. Banks are still obliged to calculate a 97.5% VaR for backtesting purposes
- New 'liquidity horizons' similar to the Margin Period of Risk, at the Risk Factor level
- A clear boundary between the Trading Book and the Banking Book, meant to be more objective and related to specific instruments
- All firms must calculate using the Standard Approach, even if opting to use the Internal Model Approach for measurement purposes
In this webinar, David Chen will explain the new approach required by FRTB, including:
- The Sensitivity Based Approach. Mapping and Aggregating risk factors, non-linear risk.
- The Internal Model Approach: Expected Shortfall, Stress Scenarios, Liquidity Horizons
- Moving a Swaption from the Standard Approach to the Internal Model approach and the potential capital savings
- Moving an Equity position from the Internal Model Approach to the Standard Approach and the potential capital savings
- The benefits of having tools which provide this drill down and flexibility to reap the rewards
Join us for a Free Webinar on "Fundamental Review of the Trading Book (FRTB): Moving Towards Implementation"
5th July 2016: 15:00 UK, 16:00 CET, 10:00 Eastern Time
The minimum capital requirements for Market Risk, released in January 2016 mandated that banks use the Standardized Approach as a fallback if:
- A firm was not approved to use an internal model
- A firm’s desk was not approved to use an internal model
- An approved model is lower than a specified floor compared to SA.
Use Case: Razor Risk will be presenting a hypothetical portfolio comparing the Sensitivity Based Approach to the Internal Model (ES) Approach, and demonstrating how one might structure a desk in order to optimize a portfolio under the new rules.
Default Risk Charge: As the DRC specification has changed significantly from the Basel 2.5 Incremental Default Risk Charge version, with the use of a new two-factor model, we will also be discussing a proposed methodology, the differences from Basel 2.5 and the challenges in implementation.
David Chen MBA, CFA, FRM
Independent Consultant: TMX
David has 14 years’ experience in Chinese (ICBC) and Canadian major banks(RBC, TD, CIBC, Scotia Bank and National Bank). Participating mainly in large-scale projects, including building up/replacing Global Risk Management systems for 2 Canadian tier-1 banks(TD and CIBC). David has experience in risk monitoring and global risk management systems both in business side and system side as well as strong experience with vendor Front Office trading systems and risk management systems.
Owner The OTC Space, Moderator
Bill's career has included a wide variety of businesses including cash registers, children’s games, RADAR, oil drilling and for the past 20 years the capital markets, especially OTC derivatives. In the capital markets he initially worked on developing software to process OTC derivatives at Merrill Lynch, in the days when paper trade tickets were still the norm. Subsequently he has worked with major banks to improve their OTC processing capabilities, including with Barclays Capital as Head of OTC (ISDA) Projects, LCH.Clearnet as Head of Product Development for the SwapClear service and at DTCC to design, build and deploy the Trade Information Warehouse for Credit Default Swaps. He originally qualified at Greenwich University in Computing, and is a contributor to three books on OTC products and capital markets and is the owner of The OTC Space Ltd.
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