Jawwad Farid A number of banking, market risk and treasury customers have recently inquired about our course offering on the Setting Risk Limits topic. Given the rise in volatility and the increased regulatory supervision for market risk, the limit setting, monitoring and controlling piece is
Interest Rate Risk Repricing limits Repricing limits are set for interest rate management. These limits control exposure by controlling the volume or amount of securities that are repriced in a given time period. By staggering the repricing of the securities the company can reduce the
Counterparty Risk Limits PSR Limits Pre-settlement risk (PSR) is the risk that a counterparty to a transaction, such as a forward contract, will not settle or honour his/ her end of the deal. PSR limits are based on the worst case loss that is likely to
Other Limits Duration Limits Duration measures the sensitivity of the price of the product/ value of the portfolio to changes in the interest rate. In order to limit the sensitivity the company needs to decide what the acceptable level of duration for the product/ portfolio
Value at Risk Limits The company would need to decide on the level of VaR based on the risk appetite of the company. Odds VaR Limits 1:99 99% 1:9 90% 1:4 80% 1:3 75% 1:2 66% 2:3 60% They would also need to decide on
An introductory course aimed at banking, corporate, treasury and sales teams that reviews intermediate and advance derivative products with afocus on marketing and sales applications. Participants work with product, sales, pricing and risk concepts applicable to derivative markets.
A two day introduction to treasury products, pricing, operations and risk for non-treasury resources. The course aims to fill in knowledge gap for teams that interact and interface with treasury and can benefit from an insider’s look at how treasury desks quote, manage and execute
Capital Loss and Stop Loss – Defining risk appetite? Stop loss limits Stop loss limits act as a safety valve in case something starts to go wrong. Stop loss limits state that specified action must take place if the loss exceeds a threshold amount. Tight
For control and governance purposes the Treasury limit management function is kept under a separate group called the Middle Office with its own independent reporting line. The Middle Office function tracks and reviews treasury exposures on a day to day basis and technically in collaboration with the business users is expected to review limits whenever a change in market conditions requires it.
Treasury Limits and Control process Risk models only have value if they are used effectively in combination with limit management and control process. While a control function requires and relies on reports, the key is not generation of quantitative numbers, formatted in ten different variation