DAY 1:

Overview

• Regulatory concerns with Basel 2 and 3
• BCBS timelines/EU timelines – some of the challenges

Trading Book/Banking book

• Definition of the Trading Book+
  • Trading Book instruments: standards and presumptive list
• Risk management Policies, reporting requirements
• Definition of a trading desks
  • Impact of model withdrawal for a regulatory desk
  • Make use of sub-desk structures
  • Optimise allocation of capital across desks
• Restrictions on moving instruments between banking book and trading book
• Internal risk transfer



DAY 2:

• Standard Rules
• SBA – sensitivity-based approach
• Major instruments to each component under SA approach
• Capital requirement
  • Calculation of Delta Risk buckets, Risk weights and correlations
  • Calculation of Vega Risk buckets, Risk weights and correlations
  • Calculation of Cur Risk buckets, Risk weights and correlations
• Standard Rules for default risk
• Residual Risk
  • Instruments subject to RRAO
  • Example of correlation trading portfolio
• Requirements for desks with internal model approval
• Exercise/example calculations



DAY 3:

• Capitalisation
  • Capitalisation requirements derived from internal models with D436 amendments
  • Adding in unapproved desks
  • Estimates of capital impact of FRTB on banks
  • Capital (output) floor
• Internal Model Approach (IMA)
• General Criteria
• Model Validation Standards
  • Regulatory requirements (D352)
• Stress testing
• Expected Shortfall
  • Concepts for ES and stress ES
  • Liquidity Horizon
  • VaR vrs ES



DAY 4:

• Back testing VaR
  • Actual P+L, Hypothetical P+L and Risk Theoretical P+L
  • Exception counting – traffic lights – binomial tests
  • Problems with back testing ES and VaR
• P+L Attribution
  • Background
  • P-Values Example/Exercises: Computing the regulatory P+L attribution tests and p-values
• The Default Risk Charge (DRC)
  • DRC compared with the Basel 2.5 IRC model
  • A Spreadsheet example/exercise
  • Transactional Arrangement



DAY 5:

• Banks perspective on FRTB as a whole and Regulatory challenges
• Data challenges under FRTB for Banks worldwide
• RWA comparability exercise
• FRTB implementation timelines



Related topics:

• Full Reval VaR Vrs Historical VaR
• Stress Testing
• BCBS 239 implementation

The requirements for this course

CROs, CFOs, COOs, Presidents/VPs/EVPs/FVPs/SVPs, Global Heads, Department Heads, Managing Directors, Directors, International/Senior Managers of: