Treasury Crash Course

Package Guide

The Treasury Crash Course is an introductory course on treasury operations that provides a mix of core treasury topics as well as certain application topics. The primary focus of the core topics is to introduce key terms used in a bank’s Treasury Operations whereas the applications elaborate on 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

Value at Risk with Liquidity Premium

This course presents a VaR based approach for quantifying market liquidity risk with a detailed walkthrough of the accompanying EXCEL example. Market risk measures are calculated for base and stressed scenarios in turn for markets where trading volume is unlimited and where it is constrained. The latter measure produces a metric that is adjusted for market liquidity risk and inclusive of the liquidity premium.

The 7 EXCEL files that cover the following concepts:

  1. ALM Measurement tools – Market Value of Equity (MVE)
  2. ALM Measurement tools – Earnings at Risk (EAR)
  3. ALM Measurement tools – Cost to Close – Liquidity Risk
  4. ALM Measurement tools – Cost to Close – Interest Rate Risk
  5. Duration and Convexity Example
  6. Value at Risk calculations using the Variance-covariance (VCV) and Historical Simulation approaches
  7. Adjusting market risk VaR estimates for market liquidity risk

After taking this course you will be able to:

  • List the activities performed by a treasury group
  • Describe the various desks in a treasury group
  • Distinguish between a bank treasury and a corporate treasury
  • Explain the roles of the front office, middle office & back office functions
  • Define the Four Eye Principle
  • Define confirmation, settlement, reconciliation as it relates to treasury functions
  • Describe risks faced by Treasury
  • Summarize the different treasury products in the Foreign Exchange Market, Money Market & Capital Market
  • Outline common derivatives terminology, such as products (e.g. forwards, options) and payoff profiles
  • State the elements of a standard template used by investment banks to review a derivative transaction for risk & fit
  • Elaborate on the factors that affect the price of an option
  • Calculate forward prices and forward rates
  • List and describe product variations for options, forwards, futures and swaps
  • Discuss in brief complex structured & credit products such as cross currency swaps, participating forwards, equity linked notes, capital protected notes, commodity linked notes, range ac