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Initial Margin & SIMM Stream


 08:30: Morning Welcome Coffee 


09.00 - 09.45: Youssef Elouerkhaoui: Managing Director, Global Head of Credit Quant Analysis, Citigroup 

Image result for Youssef Elouerkhaoui

Keynote: SIMM Impact On Credit XVA   

  • Motivation: Mandatory OTC Bilateral Margining
  • Master Pricing Equation with Credit, Funding and IM
  • SIMM, FRTB and AAD
  • Conditional Expectations in the Enlarged Filtration
  • Pre and Post Default Forward Exposure Profiles with SIMM
  • Numerical Implementation
  • Applications

09.45 - 10.30: Back to CVA – Two Current IssuesJon Gregory

  • Loss given default
    • Impact of different LGD assumptions
    • Structural seniority and waterfall priority
    • Entry price and exit price
  • Wrong-way risk (WWR)
    • WWR in cross currency swaps
    • New evidence from the Quanto CDS market on Japanense names
    • Implied jump sizes across sector and rating
    • Evidence from the FX options market

Presenter: Jon Gregory: Independent xVA Expert


 10.30 – 11.00: Morning Break and Networking Opportunities


11.00 - 12.30: Efficient Initial MarginMassimo Morini

The Initial Margin is an amount of collateral that CCPs and Regulators require dealers to post beside Variation Margin. Computing the funding cost associated to Initial Margin requirements, at times called MVA (Margin Value Adjustment), presents both conceptual and computational challenges. Here we propose a method that, differently from other proposals in the literature, does not involve nested monte carlo simulations under different probability measures, but only risk-adjusted simulation without approximations. Since in some cases this method is computationally intensive, in the next we show how to achieve computational efficiency by exploiting mathematical inequalities for skipping lenghty calculations without affecting final results. We conclude by showing some numerical analysis of the computational performances and some empirical verication of the soundness of the outcomes.

Presenter: Massimo Morini: Head of Interest Rate and Credit Models, Gruppo Intesa Sanpaolo


 12.30 - 13.30: Lunch


13.30 - 14.15Managing Market Liquidity Risk in CCPs Pedro Gurrola Perez

  • CCPs often manage market liquidity (or concentration) risk by requiring members to post additional collateral to their initial margin in the form of “concentration-add-ons”
  • Concentration add-ons are usually determined by attempting to estimate the cost of liquidating a position or assuming a sufficiently extended margin period of risk during which liquidation costs would be minimal
  • The above two approaches are not always equivalent
  • The CCP default waterfall should account for cases of extreme but plausible market illiquidity  

Presenter: Pedro Gurrola-Perez: Senior Technical Specialist, Bank of England


14.15 - 15.00: Behavioural XVA 

  • Normal hedging behaviour changes client XVA prices by breaking assumption of counterparty independence
  • Whilst clients are non-defaulted hedges with defaulting counterparties will be replaced, whereas on client default hedges will be removed
  • We provide mathematical pricing framework and numerical examples
  • Significant effect on MVA with CCPs when hedging client trades; variable effects on XVA from multiple non-CCP hedge defaults 
  • Without taking behaviour into account client XVA prices can be materially incorrect 

Presenter: Chris Kenyon: Head of XVA Quant Modelling | FOS-Quant Modelling, MUFG Securities EMEA plc 


  15.00 - 15.15: Afternoon Break and Networking Opportunities


Conference Closing Presentation:
Damiano Brigo

15.15 - 16.00: Cost of Capital & Valuation: A Target Performance Approach 

  • Moving beyond the replication approach
  • Target performance: RAROC-type analysis
  • Cost of capital via indifference to RAROC type metrics
  • Whole bank view vs Shareholders view

Presenter: Damiano Brigo: Chair in Mathematical Finance and Stochastic Analysis, Imperial College London, Dept. of Mathematics  


  End of conference