This document summarizes a conference on derivative funding and valuation. The conference will focus on incorporating capital and collateral costs into practical derivative pricing strategies. It will provide insights into optimizing front office books in the derivatives space by focusing on evolving valuation adjustments and applications of funding valuation. The conference aims to equip delegates with practical strategies for areas like CVA hedging, FVA implementation, and incorporating regulatory capital into derivative pricing. It features expert panels and case studies from industry practitioners.
1. “Pricing for collateral, capital and funding directly
impacts our bottom line. We must remain competitive”
3rd
Annual
Derivative Funding
and Valuation Forum
Incorporating capital and collateral costs in practical derivative pricing strategy
Downtown Conference Center,
New York
March 3rd
– 4th
2014
Banks are facing pressing questions on the funding
of their books. The funding of derivatives is no
exception. To keep up in this fast-moving space it is
becoming essential to price fund derivative books
comprehensively and competitively. Thinking on
the issue has shifted rapidly towards the practical
application of the most sophisticated discounting,
valuation and funding methodologies possible.
Looking towards the front office, where does this
leave industry practice for collateral treatments,
arbitrage, valuation adjustments and trade book
profitability? This GFMI marcus evans conference
will equip delegates with insight into optimizing
front office books in the derivatives space.
With a focus on evolving valuation adjustment
arguments and application, this conference will also
provide an insight into the next step in valuation
and regulatory pricing, maximizing the performance
of funding desks and derivatives portfolios.
In the Chair:
Karin Bergeron
Director, CVA Trading
Scotiabank
Expert Speaker Panel
Paul Bowmar
Managing Director, CVA Trading
BNP Paribas
Kiran Shekar
Head of CVA Trading
BNY Mellon
Tony Wells
Managing Director, Counterparty
Exposure Management
RBS
Janaka Withana
Head of FVA
UBS
Pallav Grigo
Director, Counterparty Credit Trading
BMO Capital Markets
Jennifer Courant
Managing Director
Citigroup
Toby Lawson
Head of Interest Rate Swap Trading
BBVA
Will Collins
Managing Director, Counterparty Risk Trading
RBC
Terry Demopoulos
Managing Director, Quantitative
Risk Analytics
RBC
Dilip Patro
Deputy Director, Market Risk Analysis Division
Office of the Comptroller of the Currency
Adam Drum
Head CVA Desk Americas
JP Morgan
Adam Durran
Executive Director, CVA Trading
Nomura Securities International, Inc.
Karin Bergeron
Director, CVA Trading
Scotiabank
Gordon Liu
Head Wholesale and Markets Risk Analytics
HSBC
Pawel Pliszka
Managing Director
SunTrust
Ismail Iyigunler
Quantitative Analyst
Intercontinental Exchange
Roberto Caccia
Director of Burridge Center
and Senior Instructor
Leeds School of Business,
Colorado University at Boulder
Massimo Cutuli*
Vice President
Goldman Sachs
*Subject to final confirmation
Masterclass Leader
Kenneth Gustin
President
Independent Research and Risk Advisory LLC
Interactive Masterclass
on March 3rd 2014
Managing the CVA project: Setup,
Application, Review and Strategic Direction
Key Learning Benefits
• Improve the function and mission statement of funding desks in line with front office priorities
• Apply the most comprehensive and up to date practical CVA hedging strategies and FVA
standards in the industry
• Implement evolved techniques in discounting and valuation instruments
• Optimize the valuation and treatment of collateralized and uncollateralized exposure
• Evaluate the most robust and practical FVA applications
• Maintain a competitive funding and pricing strategy for CVA charges
Key Practical Case Studies
• BNY Mellon discuss evolutions in funding desk infrastructure and mission
• HSBC present strategies to minimize the CVA charge in practice
• BMO debate developing a funding valuation industry standard
• RBS open the dialogue on developing real world replacement valuation adjustments
Media Partners
2. 08.30 Registration and Coffee
09.00 Opening Address from the Chair
Karin Bergeron
Director, CVA Trading
Scotiabank
VALUATION ADJUSTMENTS: BENCHMARKING AND MAPPING THE
LATEST DEVELOPMENTS
09.10 Evolution of valuation adjustments: Forward facing timeline of
derivative pricing
• CVA to FVA: Mapping the movement and development
of valuation mechanisms
• CVA application under regulation: Market benchmarks
and market influence
• What do you have to be doing versus what you should be doing
• Impact of adjustments: Price, capital, and volume management
• 2014 application CVA and further valuation
Karin Bergeron
Director, CVA Trading
Scotiabank
CVA: SETTING UP THE DESK AND DEFINING ITS ROLE
09.50 Coordinating value adjustments between desks
• Risk systems and CVA
• Aggregation and managing information flows
• Constraints and solutions facing CVA architecture
Jennifer Courant
Managing Director
Citigroup
10.30 Coffee and Networking Break
10.50 Case Study
Continuing advances in CVA infrastructure
• Building the infrastructure for a CVA desk
• What data is needed and from where?
• Vendor solutions versus in-house: What suits the need of your bank?
Kiran Shekar
Head of CVA Trading
BNY Mellon
GAINING APROVAL FROM REGULATORS
11.30 CVA: A regulator’s perspective
• Counterparty risk regulatory capital and RWAs under Basel iii
• Moving from Simple CVA to advanced CVA and IMM modelling
• CVA hedges and market risk rule
• Implications for model development, validation
and supervisory review
Dilip Patro
Deputy Director, Market Risk Analysis Division
Office of the Comptroller of the Currency
12.10 Networking Lunch
13.10 Joint Session
The cost of rating-based additional termination events
in ISDA agreements
• Impact on the valuation of derivative portfolios when rating
events occur
• Exploring embedded optionality and economic/funding implications
• Case studies: Quantifying the RB-ATE impact for a vanilla interest
rate swap and a commodity option,
• Analyzing sensitivity to ATE rating trigger levels
Roberto Caccia
Director of Burridge Center and Senior Instructor
Leeds School of Business, Colorado University at Boulder
Massimo Cutuli*
Vice President
Goldman Sachs
*Subject to final confirmation
OPTIMISING VALUE DYNAMICS: CVA HEDGING STRATEGY
AND PRACTICAL CAPITAL MANAGEMENT
13.50 Panel Discussion
CVA hedging: To hedge or not to hedge CVA?
• Established methods and current limitations
• Economic versus capital hedging
• Utility and future potential of CDS spreads in evaluating credit risk
• New and viable proxy and spread curve options for CCR
• Optimising returns through hedging
Paul Bowmar
Managing Director,
CVA Trading
BNP Paribas
Tony Wells
Managing Director,
Counterparty Exposure
Management
RBS
Adam Drum
Head CVA Desk Americas
JP Morgan
Adam Durran
Executive Director, CVA Trading
Nomura Securities
International, Inc.
14.30 Coffee and Networking Break
14.50 The regulatory CVA and capital landscape for derivatives
• USA versus European exemptions: Competition and arbitrage
• How has this impacted competitiveness?
• Who bears the cost of the charge?
• Gaining capital relief through CDS
• What role can the CVA desk play in optimizing capital allocation for
derivative trades?
• Growing concerns and responsibilities for traders around
managing RWAs
Gordon Liu
Head Wholesale and Markets Risk Analytics
HSBC
15.30 Joint Session
Capital inclusive derivative pricing
• Converting regulation to a quoted price
• Projecting forward exposures in a regulatory capital context.
• Deriving forward capital from forward exposure profiles
• Is ‘Capital VA’ the next XVA?
• Risk management and reporting in a Capital VA world
Will Collins
Managing Director,
Counterparty Risk Trading
RBC
Terry Demopoulos
Managing Director,
Quantitative Risk Analytics
RBC
16.10 Closing Comments from Chair and End of Day One
INTERACTIVE MASTERCLASS: MANAGING THE CVA PROJECT:
SETUP, APPLICATION, REVIEW AND STRATEGIC DIRECTION
16.15 Masterclass Registration and Coffee
16.30 Opening Comments from Masterclass Leader
Kenneth Gustin
President
Independent Research and Risk Advisory LLC
• Assessing the functional requirements of the CVA desk
• Evaluating and appraising legacy systems and current
infrastructure
• Engagement with multiple user bases: Front to back office
participation, application and integration
• Defining and aligning with bank mission and business priorities
• Application, maintenance and review of CVA infrastructure
Masterclass participants will enjoy coffee and networking
opportunities halfway through the masterclass at 17.30.
19.00 Closing Comments from Masterclass Leader
Day One
March 3rd
2014
3. 08.30 Registration and Coffee
09.00 Opening Address from the Chair
Karin Bergeron
Director, CVA Trading
Scotiabank
TRADER PERSPECTIVE: APPLICATION AND PRICING FOR RATES
AND OTC DERIVATIVES
09.15 Incorporating adjustments into front office pricing
• Pricing unwinds using collateral specific curves and integrating a
variety of adjustments
• Decision making in context of customer business vs adjustments
• Feedback and post-mortems for CVA and adjustment desks
• Determining sales franchise/benefit in a new world of CVA
Toby Lawson
Head of Interest Rate Swap Trading
BBVA
10.00 The impact of CCPs, new collateral standards,
and the possibility of standardized CSAs on valuation
• What do new regulations mean for the treatment of collateralized
transactions?
• Exploring the dynamics between collateral and CVA: Avoiding
double counting
• Will the use of CCPs eventually eliminate many of the challenges
around CVA, FVA, etc?
Adam Drum
Head CVA Desk Americas
JP Morgan
10.45 Coffee and Networking Break
FVA: DEVELOPING SUPPLEMENTARY VALUATION ADJUSTMENTS
11.15 Developing an FVA charge to implement in pricing
and negotiation
• What is FVA?
• Pricing for liquidity and other funding metrics
• Challenges in interpretation, transparency, disclosure
• Establishing accounting measures in the absence of an industry
standard
• FVA at portfolio versus individual trade level
Pallav Grigo
Director, Counterparty Credit Desk
BMO Capital Markets
12.00 Networking Lunch
13.30 Panel Discussion
Influencing FVA margin impact: More than an incremental price
change
• Defining funding costs, funding buffers and FVA inputs
• What are the broader funding questions handled by FVA?
• Practical application of FVA: Benchmark who is doing what?
• Importance of FVA over DVA in business management
and strategy
• FVA in practical trading: Optimizing margin and returns
Janaka Withana
Head of FVA
UBS
Will Collins
Managing Director,
Counterparty Risk Trading
RBC
Pallav Grigo
Director, Counterparty
Credit Desk
BMO Capital Markets
Pawel Pliszka
Managing Director
SunTrust
14.15 Case Study
Hedging funding costs
• Linear and non-linear risks due to difference between funding and
reset rates
• Hedging a portfolio of collateralized and uncollateralized derivatives
in presence of funding
• Calculating and communicating FVA costs for uncollateralized
swaps (initial valuation, unwind clauses, unwinds, novations)
• Choice of reference frame: alternatives to LIBOR
Pawel Pliszka
Managing Director
SunTrust
15.00 Coffee and Networking Break
FURTHER DEVELOPMENTS IN DERIVATIVE PRICING
15.30 RVA: Considering replacement costs and break clauses
• What is RVA?
• Assessing the cost of finding a replacement counterparty
• Linking this with the other valuation adjustments in play
• RVA in practice: How do you actually do this?
Tony Wells
Managing Director, Counterparty Exposure Management
RBS
16.15 Collateralized CVA valuation with rating triggers
and credit migrations
• Incorporating rating triggers into CVA
• RVA: Rating Valuation Adjustment
• Dynamic collateralization and rehypothecation risk
Ismail Iyigunler
Quantitative Analyst
Intercontinental Exchange
17.00 Closing Comments from Chair and End of Conference
Day Two
March 4th
2014
Who will be there
VPs, Heads and Directors of:
• CVA,
• CVA Trading
• Trading Risk Management
• Interest Rate Risk
• Market Risk
• Product Valuation
• Counterparty Trading
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This course carries a program level of intermediate requiring a
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There is no advance preparation necessary for this Group Live
activity and should it be completed in entirety. Attendees will be
eligible for 18 CPE credits in the Management Advisory Services
field of study.
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