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A  walk through of  learning objectives and included materials covered in our Continuing Professional Education (CPE Online) credit courses on Treasury products and Value at Risk available as part of 50 and 100 hour CPE Online bundles.

CPE Online Training Credits – Treasury Products & Operations

CPE Online Training - Continuing Professional Education (CPE) - Treasury Products & Value at Risk courses

CPE Credits – The Treasury Operations Course

The Treasury Crash Course is an introductory course on treasury products & operations that provides a mix of core treasury topics as well as certain application topics. We introduce key terms used in banking Treasury Operations groups and then use applications to elaborate key concepts such as treasury profitability, derivatives products and pricing, asset liability management, liquidity management. The course covers the following topics:

1. What is a Treasury?

* The Money Market Desk
* The FX Desk
* The Equity Desk
* The Specialized Desks
* What do treasuries do?
* Difference between a corporate and bank treasury function

2. The Treasury Function

* FX desk Trade Flows
* Treasury operations, including user roles and activities for the front, middle and back office functions
* Common Treasury terminology
* Treasury markets (such as FX Market, Money Market, Capital Market) and products

3. Cross Selling Treasury Products

* Five core themes for treasury customer discussions (Price, Risk, Value, Products and Limits)
* Core Treasury products and TMU customer reactions

4. Derivatives Terminology crash course (including products and payoff profiles)

5. Derivatives Products and Pricing

* Standard Template for Evaluating Derivatives
* Types of derivatives (forwards, futures, options, swaps)
* Product Variations for each type

6. Advanced derivative products (such as structured and credit products)
7. Calculating Forward Prices and Rates in EXCEL
8. Other Treasury Formulas
9. Asset Liability Management

* Types of risks
* Duration and Convexity
* Risk Measurement tools (such as MVE, EAR, NIIR, Gaps, Cost to Close)
* ALM Applications (immunization, dedication)

10. Liquidity Management

* Ratios and Analysis
* Contingency Funding Plan
* Liquidity Enhancement Techniques

11. Setting Limits

* Risk Limits and Control Process (including an overview of the types of limits and limit hierarchy)
* A detailed look at limits (including stop loss, VaR, regulatory, duration, convexity, PVBP, PSR, counterparty, settlement risk, concentration limits)
* Application of limits to products
* Liquidity Risk limits (including cash flow mismatch, maturity, concentration, contingent liability limits)
* Interest Rate Risk limits
* Limit Breach, Exception Processing and Reporting and Action Plans for trigger zones

12. Treasury Profitability (FX and Capital Market Desks)
13. Calculating VaR at Risk – step-by-step methodologies, caveats and qualifications
14. Build maturity and liquidity profiles for deposits and advances

CPE Online Training – Video Courses – Selling treasury product & Setting Limits

The “Crossing Selling Treasury Products” video course presents a framework for empowering client facing treasury teams to go out and cross sell high value, high margin trading concepts to clients. They do this by educating customers about their exposures and by presenting a range of available solutions that would help reduce the risk associated with these same exposures. There are a number of challenges when it comes to communicating, enforcing and setting limits in a trade, treasury, portfolio and risk function.

One big factor is the language of limits. When it comes to building consensus across Traders, Risk and Credit, it is like a tower of Babel. Traders speak and understand Stop loss, risk managers work and vouch for value at risk, credit officers track and live for PSR (Pre-Settlement). How do we link the three?

Our short “Setting Limits” video course picks up and builds up on the core concepts covered in two of our earlier courses, The Quant Crash Course and Calculating Value at Risk and introduces the linkage between Stop loss and Value at Risk by defining the median trading loss.

The median trading loss is the likely trading loss we expect to see every 2nd or 3rd trading day. We then link the median trading loss to a VaR confidence level that can be used for communicating results and suggesting limits to Board Risk Committees. To build the intuition for that conversation we introduce the concept of odds and highlight the interpretation problem Board members face when seeing extreme probabilities (the problem first highlighted and suggested by Nicholas Nassim Taleb).

In the final part of our course we switch our focus to PSR (Pre Settlement Risk) limits calculations. PSR limits are counterparty limits that calculate the worst case likely loss on account of default on settlement date by a given counterparty. Once again a VaR measure subject to changing volatilities, our approach highlights the usage of maximum, minimum and median volatilities and suggests that the underlying VaR estimates need to be reviewed more frequently than the once in 2 or 3 year practice we have observed in the region.

CPE Online Training – Treasury Products & Operations Course – Excel Files – Calculating PSR Limits.

An example of how a Pre-Settlement Risk (PSR) limit is set for an FX forward contract and a Futures contract on WTI (crude oil) respectively. These Value-at-Risk (VaR) based counterparty limits are calculated by:
1. Deriving a return series from historical price series
2. Deriving a volatility measure from the return series
3. Determining a worst case price shock based on the volatility measure, a confidence level and the days to settlement of the contract
4. Determining the PSR limit in absolute terms as well as in relation to the original value

CPE Online Training Credits – Value at Risk – Calculations, Models, Issues.

CPE Online Training - Continuing Professional Education (CPE) - Treasury Products & Value at Risk courses

One of the most pertinent questions in risk management has been: How much do you stand to lose, over a certain period and with a certain probability? What is that number and what does it stand for? The number being referred to here is Value at Risk (VaR). VaR uses historical market trends and volatility to estimate the likelihood that a given portfolio’s losses will exceed a certain amount. 

CPE Online Training Credits – Value at Risk – Calculations, Models, Issues – Primary Study Guide

The course aims to first provide a basic introduction to this common and widely used risk measurement tool and then present a non-traditional, market risk oriented application to show how it could be extended to address other interesting questions. Topics covered:

1. A review of Value at Risk (VaR) calculation methods including:

* Variance-covariance simple moving average approach
* Variance-covariance exponentially weighted moving average approach
* Historical simulation approach

2. Creation of a simple portfolio and step-by-step calculation of its VaR under the first two approaches mentioned above.
3. VaR issues and related caveats and qualifications pertaining to the use of this measure.

4. VaR case-study demonstrating the application of VaR in a non-traditional, market risk oriented application, in particular the use of the value at risk (VaR) measure as a tool to forecast and predict the margin shortfall problem within the oil, gas and petrochemical industry.

CPE Online Training Credits – Calculating Value at Risk – Video Section

This course takes an in-depth look at the calculation methodologies of the Value at Risk measure. We review Value at Risk (VaR) calculation methods in particular the Variance-covariance approach and the Historical simulation approach. We build a simple portfolio comprising of Euro, Australian dollar, Yen, GBP, Brent, WTI, Gold and Natural Gas and calculate VaR for the portfolio using both of these methodologies.

CPE Online Training Credits – Quant Crash Course – Video Section

The “Quant Crash Course” covers volatility, value at risk, capital and limit management frameworks for a treasury function. The course material has evolved over a number of years as part of our risk training practice particularly in the areas of derivative pricing and risk management. The following topics among others are discussed in the course:

* The Distribution or generator function
* The importance of Volatility and Correlation to a risk management or control function
* The importance of having pre-trade controls and limits
* Duration, Convexity and Optionality
* Value at Risk (VaR) measure and its various applications
* The limitations of using a VaR measure
* Various types of capital and risks for which capital may be attributed
* A capital focused risk management framework
* A limits management framework
* Types of limits such as stop loss, transaction, expectations and counterparty limits

CPE Online Training Credits – Calculating Value at Risk – Excel Section

CPE Online Training – Value at Risk – Single Position

The sheet includes historical data series for Fuel Oil, WTI Crude Oil and Gold prices. It calculates historical volatility for Crude Oil as well as does a basic back test using a histogram. Also calculates Value at Risk for a WTI Crude Oil position using multiple confidence level.

CPE Online Training – Value at Risk – Portfolio VaR

Excel Example is a detailed calculation sheet that demonstrates the calculation of VaR for a portfolio of six instruments comprising of 3 foreign exchange contracts (EUR, AUD and JPY) and three commodities (WTI, Gold and Silver).

Before calculating the VaR for the portfolio, the metric is calculated for each instrument within the portfolio using the Simple Moving Average Variance Covariance Approach and the Historical Simulation Approach. It shows how a graph of Trailing Volatilities is constructed and the calculation of a crude estimate of the VaR number using the maximum volatility from this trailing volatility series.

1. Variance-covariance simple moving average approach
2. Variance-covariance exponentially weighted moving average approach
3. Historical simulation approach

These approaches are used to calculate individual VaR measures for various instruments such as a commodity, currency pair, equity shares and fixed income product. They are also used to determine the VaR number for the portfolio as a whole. The calculation includes:

* Determination of return series from historical prices series
* Determination of volatilities (for Variance covariance approaches)
* Determination of VaR based on volatilities (for Variance covariance approaches), confidence level and holding period

CPE Online Training – Value at Risk – Fixed Income with liquidity adjustments

What is the amount of loss that can be incurred for selling off a position in an illiquid bond market? This course (pdf & excel combo) provides one approach to quantifying market liquidity risk. Using a hypothetical US Treasury bill and bond portfolio a VaR based approach is used to measure the amount of loss that could arise in an illiquid market situation. The methodology makes adjustments to conventional market risk VaR to obtain an estimate of the worst case loss that reflects adverse movements in market prices as well as liquidity risk. The approach assumes that the liquidity adjusted VaR measure will be a function of the market-risk VaR number, overall trading volume, daily limit on trading, size of the portfolio and period of time it takes to sell off the entire position.

The market risk measure is first determined in three separate ways:
* Rate VaR
* Delta Normal Approximation to Price VaR
* Price VaR

These metrics are calculated for a standard or base scenario and for two crisis or stressed scenarios where the underlying volatility in rates/ prices is increased by a multiplier.

To obtain the VaR metric that contains a liquidity premium, the overall volume traded is constrained. Assuming a constant daily limit on trading, the time taken to sell off the entire portfolio is determined along with the resulting VaR measure. This VaR measure is inclusive of the liquidity premium.

The loss calculated using the liquidity adjusted VaR measure over the loss calculated using the market risk VaR measure is the loss that may be attributed to market liquidity risk.