Advanced OIS Curve Building: Best Practices
Date: Wednesday, November 5, 2014
Time: 11:00 am (EDT) / 8:00 am (PDT) / 4:00 pm (GMT) / 12:00 am (HKT)
Please join the upcoming webinar on Advanced OIS Curve Building: Best Practices, hosted by Senior Derivatives Analyst, James Gavin.
Without accurate OIS curve construction, valuation, pricing, and risk output is compromised.
Because OIS is the standard funding rate in CSA agreements widely adopted in both OTC and centrally cleared markets, implications of not adopting best practices are significant.
During the webinar, James will discuss best practices for building robust OIS curves including:
- Handling nuances of the short and long ends of the OIS curve
- Dual-curve stripping and advanced smoothing techniques
- Dual-curve calibration and hedging long dated OIS-Libor basis risk
- Incorporating single currency CSAs into a multi-currency environment using USDAUD
Following the presentation, there will be an interactive question and answer period.
James Gavin, Senior Derivatives Analyst
Andy Condurache, Director of Exams & Publications, PRMIA
Please Join Us
Let’s first define Net Profit and Cash Flows before we proceed further to explore the importance of each of terminologies.
Net Profit (NP) comes from Profit and Loss (P&L) statement while OCF comes from Cash Flow statement.
Net Profit: Net of revenue or sales after removing all operating expenses, depreciation, interest and taxes and including any other income, and taking into account exceptional items.
Operating Cash Flows (OCF): The net cash generated from operations.
Investing Cash Flows (CFI): The net result of capital expenditures, investments, acquisitions, etc.
Financing Cash Flows (CFF): The net result of raising cash to fund the other flows or repaying debt.
Why OCF and not NI:
The OCF is a better metric of a company’s financial health for two main reasons. First, cash flow is harder to manipulate than net income. Second, “cash is king” and a company that does not generate cash over the long term is heading to get wiped out. The OCF gives you the picture about the cash received in the organization. Without cash, the company may not be able to fulfill its promise to make payments to suppliers, employees and financial institutions on a sustainable basis.
on July 30, Argentina defaulted on its outstanding debt. The technical default ends a long saga. It began in 2001 when the country failed to continue payments on nearly $100 billion worth of obligations, continued through its 2005 and 2010 restructurings of over 90 percent of these bonds, bled into ongoing lawsuits with “holdout creditors” including Elliott Management and Aurelius Capital Management, and culminated in the June 16 decision by the U.S. Supreme Court to not hear Argentina’s appeal of a 2012 ruling by New York Judge Thomas P. Griesa. This left in place a decision that not only bolstered the holdouts’ rights to repayment, but also blocked Argentina and its U.S.-based banks from disbursing the next $539 million round of interest due on the restructured debt. Negotiations over the last month ended fruitlessly, leading to Wednesday’s selective default, as defined by Standard & Poor’s.
Generating Historically-Based Stress Scenarios to Assess Market Risk
Date: Tuesday, October 28, 2014
Time: 11:00 am EDT | 4:00 pm BST | 11:00 pm HKT
Duration: 60 minutes
In this webcast, our experts will discuss how an accurate measure of market risk can help to inform institutions about the amount of capital needed to withstand a series of adverse market events, and improvements on assessing market risk for purposes of economic or regulatory risk based capital measurement. Their approach involves generating plausible historically‐based interest rate shocks, which can be applied to any market environment.
In the process of selecting a model, they examine variants of the Nelson‐Siegel approach to develop an improved yield curve approximation that overcomes the following challenges:
- Accurate description of observed patterns of yields
- Flexibility to handle intra-curve constraints
- Flexibility to handle inter-curve constraints
- Avoids negative forward rates
Based on these improvements, they adapt a 5‐factor parameterization developed by Bjork and Christensen (1999) and show it can accurately translate historical interest rate movements into plausible, current period shocks in any market environment. They also link the interest rate shocks to implied volatility using a novel parameterization of the swaption and cap volatility surfaces.
Together, the methodological changes discussed in this webcast should offer a more appealing alternative to industry stake holders while simultaneously promoting better risk management.
Key Learning Objectives:
- Present a robust empirical method for generating interest rate shocks, which can be used by risk managers and practitioners to measure the market risk of financial institutions.
- Show that current, commonly used industry practices for generating interest rate shocks using proportional or absolute changes have concerning limitations.
- Offer a means to impose intra- and inter-yield curve constraints to ensure plausible Treasury, Agency, and Libor-Swap interest rate movements.
- Provide a method to link realistic (historically-based, coherent, and internally consistent) interest rate changes to co-movements in other key market risk factors such as credit spreads or foreign exchange rates.
Jeffrey Kutler, Editor, Global Associaton of Risk Professionals (GARP)
Alexander Bogin Ph.D., Senior Economist, Federal Housing Finance Agency
William Doerner, Senior Economist, Federal Housing Finance Agency
In 2011, Standard & Poor’s Ratings Services’ downgrade of the U.S. had spillover effects on corporate borrowers throughout the country. A year later, the same happened with Europe’s economic turmoil and sovereign debt crisis. Nevertheless, corporate borrowers showed some resilience during 2012. In the full year, 84 global corporate issuers defaulted, up from 53 in 2011 and nearly the same as the 2010 total of 83 (see table 1). These 84 defaulted issuers accounted for a total of $86.7 billion in debt, up from $84.3 billion in 2011. (Watch the related CreditMatters TV segment titled, “The Key Findings Behind Standard & Poor’s 2012 Global Corporate Default And Ratings Transition Study,” dated March 18, 2013.)
Read more at https://www.globalcreditportal.com/ratingsdirect/renderArticle.do?articleId=1113087&SctArtId=205025&from=CM&nsl_code=CMTSE&sp_mid=26453&sp_rid=22560
orrelation Risk and Why it is Critical in Finance
Date: Tuesday, October 21, 2014
Time: 8:00 am HST | 11:00 am PDT | 12:00 am MDT | 1:00 pm CDT | 2:00 pm EDT | 7:00 pm BST
Duration: 60 minutes
In this exclusive webcast, our expert will define and explain the critical topic of Correlations in Finance. Viewed differently in different financial environments, participants will gain a thorough understanding of Financial Correlation Risk in the areas of Investing, Trading, Risk Management, Regulation and the 2007-2009 Global Financial Crisis. Produced in an interactive format, participants will also have the added benefit of two simulation models in Excel/VBA (one showing the Impact of Correlation on Value at Risk, and one on Dispersion Trading) that will be presented and distributed to all who attend.
Chris Donohue, Managing Director, Research and Educational Programs
Gunter Meissner, PhD, University of Hawaii and CEO, Cassandra Capital Management
Would you invest in bond funds for a period of 36 months to avail of capital gains tax benefits? This survey has given encouraging results with 96% of respondents positive on bond funds for investing. However, education on bond funds will be key for investors. In one question on principal protection, 27% of respondents did not believe that bond funds would protect principal unless there is credit default in the fund. 55% of respondents did not get the fiscal deficit target right.
Webinar: Evolving Practices in Stress Testing Structured Finance Portfolios
Date: Thursday, October 16, 2014
Time: 10:00 AM EST/730Pm IST
Given the evolving regulatory environment, market participants are finding the need for greater transparency, consistency, and accuracy in reporting and analysis of their structured finance products. Join Moody’s Analytics and PRMIA for a complimentary webinar on Evolving Practices in Stress Testing Structured Finance Portfolio which focuses on:
- Identifying the most challenging asset classes
- Complexities in forecasting RWA
- How to dynamically run macroeconomic scenarios
David Kurnov – Director, Structured Analytics and Valuation, Moody’s Analytics
Alexandru Voicu, Director of Education, PRMIA
This webinar is complimentary for all participants and is organized and presented by Moody’s Analytics. Thank you to Moody’s Analytics for making this webinar available to PRMIA members for their learning opportunity
SEBI has issued a circular for creating a Core Settlement Guarantee Fund to keep a tap on credit risk via default waterfall and stress tests etc for settlements in marteks etc
See Circular here