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Prudent Valuation, Initial Margins, KVA & Related Numerical Methods Stream

09.00 – 10.30: Tanguy Dehapiot: Head of Valuation Risk, BNP Paribas

Prudent Value Calculations

  • Background and overview
  • Details on main categories of AVA
  • The variance ratio test
  • Diversification effect: where does it come from?
  • Requirement for some interpretations (Valuation exposure, Expected value, Day One Profit…)

10.30 – 10.50 Break

10.50 – 12.30: Dherminder Kainth: Head Of QuaRC, RBS

Practical Computation of the Prudent Valuation Adjustment

  • Model AVA and market AVA
  • Capturing correlation effects
  • Pru val for counterparty and funding effects
  • Pru val and rnivs

12.30 – 13.40 Lunch

13.40 – 15.10: Alexander Antonov: Senior Vice President, Quantitative Research, Numerix

Efficient Numerical Methods for the KVA and the Initial Margin

  • Essential building blocks for the KVA & IM
  • The beasts: simulated Future VaR, Future PEF and Future CVA
  • Future VaR/PFE: brute force simulation and efficient approximation
  • Future CVA: theory and practice
  • Numerical comparison for cross-currency swap portfolio

15.10 - 15.30: Break

15.30 - 16.15: Dmitry Pugachevsky: Director of Research, Quantifi (to be confirmed)

Cost of Collateral for Clearing

  • Initial Margin Costs and Variation Margin Costs (IMC/VMC)

16.15 - 17.00: Alexander Sokol: CEO and Head of Quant Research, CompatibL

Challenging the Assumptions Behind the Traditional 10-day model  for the Margin Period of Risk

  • The popular 10-day model for the margin period of risk is found to make a number of assumptions that are inconsistent with market practice and the relevant legal agreements (IMA/CSA)
  • An improved model is proposed that considers the remedies and suspension rights available within IMA/CSA (accounting their variations), the firm's policies in availing itself of these rights against different types of counterparties,
  • and the typical time it takes to exercise them in practice.
  • The proposed model captures the operation of IMA/CSA in considerably greater detail than the model currently used by most practitioners, while remaining fully tractable and computationally effective.
  • The inclusion of these effects had significant impact on XVA and CCR capital for several representative portfolios we considered.

17.00 – 18.00: Panel: How will the latest regulations impact CVA

This panel will discuss and expand on how the latest regulations will Impact CVA:

  • Prudent Valuation
  • Challenges to Implementation of Prudent Valuation
  • Regulatory impact on initial margins
  • TVA: Tax Valuation Adjustment
  • Capital Requirements Regulation
  • Funding (FVA) & Accounting
  • EBA’s standardization effort

Chair:

  • Marco Bianchetti: Head of Financial Modelling & Validation, Intesa Sanpaolo

Panelists: (to be confirmed)

  • Christian Kamtchueng: CTK Head Advisor, ESSEC Lecturer MSTF
  • Moises Gerstein: Head of CVA Trading Desk- Emerging Markets, ING Bank
  • Dherminder Kainth: Head Of QuaRC, RBS
  • Alexander Sokol: CEO and Head of Quant Research, CompatibL

18:00: Networking Reception

Stay and continue the day's discussions and network with food and drink.