presentation topquants updated - copy · 2019-05-05 · imc (options market maker) quant risk...
TRANSCRIPT
Re
gu
lato
ryC
VA
Pre
sen
tati
on
To
pQ
ua
nts
Pie
ter
van
Zw
ol
18
no
v 2
01
5D
NB
-OSB
E-F
IKA
2
•B
io P
iete
r va
n Z
wo
l•
Em
ail:
a.p
.r.v
an
.zw
ol@
dn
b.n
l
•St
ud
yM
ast
er
(fin
an
cia
l) e
con
om
etr
ics
at
EU
R
•IN
G B
an
k/ I
NG
Ba
rin
gs,
Tre
asu
ry &
Tra
din
gD
eri
vati
ves
rese
arc
h (
pri
cin
g &
he
dg
ing
), T
rad
er
inte
rest
ra
tes
de
riva
tive
s
•IM
C (
op
tio
ns
ma
rke
t m
ake
r)q
ua
nt
risk
ma
na
ge
me
nt,
he
dg
ing
ir,
sta
tist
ica
l arb
itra
ge
tra
de
r, t
rad
er
com
m.
ma
rke
ts
•P
GG
M (
Tre
asu
ry)
Exe
cuti
on
of
all
de
riva
tive
po
siti
on
s
•So
urc
eC
ap
ita
lA
G (
Swis
s b
ase
d h
ed
ge
fun
d)
Alg
ori
thm
ic d
eve
lop
er
& h
igh
fre
qu
en
cy t
rad
er
•SN
SREA
AL/
Viv
at
ALM
ris
k &
co
un
terp
art
y ri
sk
•D
NB
su
pe
rvis
or
spe
cia
list
at
OSB
E-F
IKA
-de
pa
rtm
en
t
•O
SBE
-FIK
A=
Fin
an
cia
l ri
sk &
ca
pit
al i
nst
rum
en
ts a
t O
SBE
(O
nsi
te a
nd
ba
nca
ire
exp
ert
ise
) d
ivis
ion
•M
y w
ork
ing
to
pic
s in
clu
de
ma
rke
t ri
sk,
liqu
idit
y ri
sk &
CC
R a
t b
an
ks,
Ma
rke
t &
Ba
nki
ng
bo
ok
•D
ISC
LAIM
ER
: All
info
in t
his
pre
sen
tati
on
is b
ase
d o
n p
ers
on
al
vie
w/a
cco
un
t
18
no
v 2
01
5D
NB
-OSB
E-F
IKA
3
DN
B-O
SB
E-F
IKA
•D
NB
ha
s 3
pill
ars
: ce
ntr
al
ba
nk,
po
licy
& s
up
erv
isio
n p
illa
r
•S
up
erv
isio
n
•O
SB
E=
On
site
div
isio
n w
ith
in S
up
erv
isio
n P
illa
r
•F
IKA
=F
ina
nci
al
risk
& c
ap
ita
l in
stru
me
nts
(d
ep
art
me
nt
13
pe
op
le)
•C
urr
en
tly
we
ha
ve 2
va
can
cie
s (!
!)
•1
in
tere
st r
ate
exp
ert
•1
EM
IR/L
iqu
idit
y e
xpe
rt
•re
leva
nt
Inte
ract
ion
s: b
an
ks,
SS
M,
JST
(lo
cal a
nd
Fra
nkf
urt
ba
sed
), C
en
tra
l O
nsi
te I
nsp
ect
ion
s (C
OI)
, E
BA
, E
CB
18
no
v 2
01
5D
NB
-OSB
E-F
IKA
4
•JS
T=
Join
t Su
pe
rvis
ory
Te
am
(=
acc
ou
nt
ma
na
gers
=ge
ne
ralis
ts)
ask
s o
nsi
te t
ea
m t
o
inve
stig
ate
a s
pe
cia
l to
pic
at
his
/he
r b
an
k (o
r se
vera
l)
•JS
T &
On
site
se
t th
e m
ain
sco
pe
of
inve
stig
ati
on
•O
nsi
te t
ea
m i
nve
stig
ate
s (a
pp
rox.
6-8
we
eks
) a
nd
de
live
rs in
spe
ctio
n r
ep
ort
wit
h
fin
din
gs
to J
ST
•JS
T w
rite
s re
com
me
nd
ati
on
s b
ase
d o
n f
ind
ing
s ta
kin
g in
to a
cco
un
t th
eir
pri
ori
tie
s
•JS
T f
ollo
ws
up
to
his
/he
r b
an
k w
ith
th
eir
re
com
me
nd
ati
on
s
•Im
po
rta
nt:
On
site
te
am
de
live
rs t
o J
ST �
ind
ep
en
de
nce
is k
ey
18
no
v 2
01
5D
NB
-OSB
E-F
IKA
5
Tim
elin
e o
nsi
te i
nsp
ect
ion
s
Ma
in G
oa
l o
f th
is p
rese
nta
tio
n:
Info
rma
tive
•C
CR
ris
k, C
VA
(p
rici
ng
, a
cco
un
tin
g a
nd
ca
pit
al
req
uir
em
en
t)
•Id
en
tify
th
e k
ey
ing
red
ien
ts f
or
calc
ula
tin
g E
AD
an
d r
eg
ula
tory
ca
pit
al
(sta
nd
ard
ize
d)
•D
esc
rib
ing
cu
rre
nt
me
tho
ds,
fo
cus
on
Sta
nd
ard
ize
d a
pp
roa
ch S
A (
CE
M)
•E
lab
ora
te o
n t
he
ne
w p
rop
ose
d S
A-C
CR
me
tho
d (
off
icia
l 2
01
7)
•M
ain
dif
fere
nce
s re
late
d t
o e
xam
ple
de
riva
tive
s p
ort
folio
•Ta
ke-a
wa
ys
18
no
v 2
01
5D
NB
-OSB
E-F
IKA
6
Wh
y is
CV
A s
o im
po
rta
nt?
•Th
e p
rese
nt
valu
e o
f a
de
riva
tive
do
es
no
t o
nly
ch
an
ge d
ue
to
ma
rke
t d
ata
ch
an
ges
(ex
po
sure
), b
ut
als
o d
ue
to
ch
an
ges
in t
he
cre
dit
-wo
rth
ine
ss o
f th
e c
ou
nte
rpa
rty
. Th
is
cou
nte
rpa
rty
cre
dit
ris
k is
re
fle
cte
d b
y ca
lcu
lati
ng
CV
A
18
no
v 2
01
5D
NB
-OSB
E-F
IKA
7
His
tory
CV
A•
To o
verc
om
e c
urr
en
t a
nd
fu
ture
cre
dit
exp
osu
re t
o f
ina
nci
al
cou
nte
rpa
rtie
s re
sult
ing
fr
om
de
riva
tive
s tr
an
sact
ion
s
•2
00
8 D
uri
ng
th
e f
ina
nci
al
cris
is m
an
y b
an
ks i
ncu
rre
d l
oss
es
du
e t
o C
VA
mo
ves
(it
wa
s e
stim
ate
d t
ha
t 2
/3 w
as
ori
gin
ate
d b
y C
VA
vo
lati
lity)
•2
00
9 B
ase
l III
intr
od
uct
ion
of
ne
w c
ap
ita
l ch
arg
e a
gain
st C
VA
vo
lati
lity
(ca
lcu
late
d b
y st
an
da
rdiz
ed
or
ad
van
ced
fo
rmu
la)
•2
01
4 F
ina
l p
ap
er
of
ne
w S
tan
da
rdiz
ed
Ap
pro
ach
fo
r C
ou
nte
rpa
rty
Cre
dit
Ris
k (S
A-C
CR
):
•1
/1/2
01
7 B
ase
l ad
op
tio
n
•>
=2
01
7 E
C a
pp
rove
d
18
no
v 2
01
5D
NB
-OSB
E-F
IKA
8
CV
A im
pa
ct•
Org
an
isa
tio
n(C
VA
de
sk)
•P
rici
ng
(e
xte
rna
l, i
nte
rn=
tra
nsf
er
pri
cin
g)
•A
cco
un
tin
g (
CV
Aa
nd
DV
A)
•R
eg
ula
tory
ca
pit
al
req
uir
em
en
t (C
VA
on
ly,
DV
A n
ot
loss
ab
sorb
ing
)
Exp
ect
ed
lo
ss �
Acc
ou
nti
ng
Un
exp
ect
ed
lo
ss �
Re
gu
lato
ry
–A
CV
A
-S
CV
A
18
no
v 2
01
5D
NB
-OSB
E-F
IKA
9
EA
D m
od
ell
ing
Inte
rna
l Mo
de
l M
eth
od
(IM
M)
for
CC
R:
•N
ee
ds
sup
erv
iso
ry a
pp
rova
l
•ta
ilor-
ma
de
ap
pro
ach
•sc
en
ari
o g
en
era
tor
•P
an
d Q
pro
ba
bili
ty-m
ea
sure
•ti
me
co
nsu
min
g
Sta
nd
ard
ize
d m
eth
od
•C
urr
en
t E
xpo
sure
Me
tho
d (
CE
M)
or
Sta
nd
ard
ize
d m
eth
od
(SM
)
•N
o s
up
erv
iso
ry a
pp
rova
l
•U
nif
orm
ap
pro
ach
•Si
mp
le a
nd
qu
ick
SA-C
CR
re
pla
ces
CE
M a
nd
SM
18
no
v 2
01
5D
NB
-OSB
E-F
IKA
10
Sta
nd
ari
zed
CV
A
•E
xpo
sure
(in
stru
me
nts
, re
ma
inin
g m
atu
rity
)
•C
red
it q
ua
lity
of
cou
nte
rpa
rty
•N
ett
ing
Se
ts
•C
olla
tera
l sp
eci
fics
18
no
v 2
01
5D
NB
-OSB
E-F
IKA
11
•N
ow
th
e m
od
elli
ng
stu
ff!
18
no
v 2
01
5D
NB
-OSB
E-F
IKA
12
Cu
rre
nt
Ex
po
sure
Me
tho
d
EA
D=
RC
+ P
FE
= R
C +
No
tio
na
l*N
ett
ing
Fa
cto
r*A
dd
-On
= m
ax(
MtM
-C,0
) +
No
tio
na
l*N
ett
ing
Fa
cto
r*A
dd
-On
18
no
v 2
01
5D
NB
-OSB
E-F
IKA
13
Sta
nd
ari
zed
CV
A
Ne
t to
Gro
ss r
ati
o (
NG
R)
= R
Cn
et/
RC
gro
ss
•R
c ne
t=
su
m o
f th
e R
C o
ver
the
tra
nsa
ctio
ns
wit
hin
th
e N
S
•R
c gro
ss=
su
m o
f m
ax(
RC
,0)
ove
r th
e t
ran
sact
ion
s w
ith
in t
he
NS
18
no
v 2
01
5D
NB
-OSB
E-F
IKA
14
Sta
nd
ari
zed
CV
A:
Ne
ttin
g F
act
or
For
ea
ch in
stru
me
nt
in t
he
NS,
th
e a
dd
-on
de
pe
nd
s o
n:
•th
e t
rad
e's
re
sid
ua
l ma
turi
ty
•th
e u
nd
erl
yin
g in
stru
me
nt
typ
e
18
no
v 2
01
5D
NB
-OSB
E-F
IKA
15
Sta
nd
ari
zed
CV
A:
Ad
d-o
n
NE
TT
ING
18
no
v 2
01
5D
NB
-OSB
E-F
IKA
16
•P
FE
Ad
d-o
n =
0.6
*A
dd
-On
*(R
Cn
et
/ R
Cg
ross
)+0
.4*
Ad
d-O
n
Ma
in I
de
a:
A p
erf
ect
ba
lan
ced
exp
osu
re b
oo
k h
as
(RC
ne
t/
RC
gro
ss)=
0T
he
min
ima
l re
ach
ab
le P
FE
ad
d-o
n
PF
E a
dd
-on
= 0
.4*
ad
d-o
ng
ross
•E
AD
= m
ax(
0,
MtM
-Co
llate
ral)
+ P
FE
= R
C +
No
tio
na
l*P
FE
Ad
d O
n
•O
n N
S le
vel
18
no
v 2
01
5D
NB
-OSB
E-F
IKA
17
Re
qu
ire
d C
ap
ita
l
SA
-CC
RT
he
ne
w S
tan
da
rd A
pp
roa
ch f
or
Co
un
terp
art
y C
red
it R
isk
(SA
-CC
R)
will
be
com
e e
ffe
ctiv
e
1 J
an
ua
ry 2
01
7
EA
D
= 1
.4*
(RC
+ P
FE
)
= 1
.4*
(RC
+ m
ult
ipli
er*
Ad
d-o
n)
RC
:
•U
nm
arg
ine
dTr
ad
es:
RC
=m
ax
( M
tM-C
; 0
)
•M
arg
ine
d T
rad
es
: R
C=
ma
x(
MtM
-C;T
HA
+M
TA-N
ICA
; 0
)
Ad
d-o
ns:
•B
ase
d o
n c
on
cep
t o
f H
ed
gin
g s
ets
•A
sse
t cl
ass
es:
In
tere
st R
ate
De
riva
tive
s, F
ore
ign
Exc
ha
ng
e D
eri
vati
ves,
Cre
dit
-a
nd
E
qu
ity
De
riva
tive
s a
nd
C
om
mo
dit
y D
eri
vati
ves
•N
o d
ive
rsif
ica
tio
n a
mo
ng
ass
et
cla
sse
s, b
ut
(so
me
) d
ive
rsif
ica
tio
n a
llow
ed
wit
hin
ass
et
cla
ss
DN
B-O
SBE
-FIK
A1
8
calc
ula
tio
ns
SDD
ELT
A(I
)
NS
tra
de
na
ture
resi
du
al
ma
tC
CY
no
tio
na
lp
ayl
eg
rec
leg
mtm
(E
UR
)M
AP
PIN
GFO
RW
AR
DST
RIK
ED
UR
AT
ION
MA
PP
ING
AD
J N
OT
ION
AL
MF
ISO
PT
ION
?A
DJU
STM
EN
TS
11
irs
10
USD
10
00
0fi
xed
flo
at
30
IR0
10
5%
$7
.72
IR--
-USD
---3
78
,69
4
1
FALS
E
(1.0
0)
12
irs
4U
SD1
00
00
flo
at
fixe
d-2
0IR
04
5%
$3
.55
IR--
-USD
---2
36
,25
4
1
FALS
E
1.0
0
13
swa
pti
on
1 in
to 1
0E
UR
50
00
flo
at
fixe
d5
0IR
11
16
%5
%$
7.8
9 IR
---E
UR
---3
37
,42
8
1
TR
UE
(0
.27
)
EA
D=
ALP
HA
*(R
C+
MU
LTIP
LIE
R*
AD
DO
N_
AG
GR
AG
AT
E)
56
9.4
7
C0
RC
60
MU
LTIP
LIE
R1
.00
0
TH
0T
HR
ESH
OLD
CO
LLA
TE
RA
L
MT
A0
MIN
TR
AN
SFE
R A
MO
UN
T
NIC
A0
NE
T I
ND
EP
EN
DE
NT
CO
LLA
TE
RA
L A
MO
UN
T
18
no
v 2
01
5D
NB
-OSB
E-F
IKA
19
Ca
lcu
lati
on
s
IR--
-USD
IR--
-EU
R
DE
LTA
(I)
<=
11
-5>
=5
<=
11
-5>
=5
AD
JUST
ME
NT
SM
F U
NM
AR
GIN
ED
12
31
23
(1.0
0)
1.0
0
(78
,69
4)
1.0
0
1.0
0
36
,25
4
(0.2
7)
1.0
0
(10
,08
3)
ir h
ed
gin
g s
et
-3
6,2
54
(7
8,6
94
)-
-(1
0,0
83
)
eff
no
tio
na
l to
tal
59
,27
0
10
,08
3
0.5
0%
SF(I
R)
FRO
M T
AB
LE0
.50
%
AD
DO
N_
AG
GR
EG
AT
E3
47
18
no
v 2
01
5D
NB
-OSB
E-F
IKA
20
Co
mp
ari
son
•C
ase
stu
dy:
•C
on
sid
er
NS
’s o
f tw
o A
TM
IR
S,
a p
aye
r a
nd
re
ceiv
er
(P/R
) co
mb
ina
tio
n
•w
ith
ma
turi
tie
s T
= 1
y; 5
y; 1
0y;
20
y.
•T
he
tw
o s
wa
ps
in t
he
po
rtfo
lio a
re i
n t
he
sa
me
cu
rre
ncy
•In
Fig
, E
AD
est
ima
tes
for
the
po
rtfo
lios
are
sh
ow
n b
ase
d o
n C
EM
an
d S
A-C
CR
fo
r co
llate
raliz
ed
(M
PO
R=
10
d)
an
d u
nco
llate
raliz
ed
NS
’s.
18
no
v 2
01
5D
NB
-OSB
E-F
IKA
21
2 s
wa
ps
in s
am
e c
cy,
paye
r a
nd
re
ceiv
er
18
no
v 2
01
5D
NB
-OSB
E-F
IKA
22
•T
he
fo
llow
ing
fe
atu
res
are
no
tice
ab
le
•C
EM
is t
he
ch
ea
pe
st m
eth
od
fo
r u
nco
llate
raliz
ed
exp
osu
re,
wit
h t
he
e
xce
pti
on
of
the
fu
lly h
ed
ged
P/R
co
mb
ina
tio
ns
(i.e
. th
e d
iago
na
l te
rms
in t
he
ta
ble
s o
f Fi
g).
•Fo
r co
llate
raliz
ed
exp
osu
re,
CE
M is
th
e m
ost
exp
en
sive
me
tho
d
•(n
oti
ce t
ha
t R
Cg
ross
= R
Cn
et
= 0
an
d t
he
refo
re C
EM
do
es
no
t a
llow
a
ny
ne
ttin
g).
18
no
v 2
01
5D
NB
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E-F
IKA
23
•m
ark
et
curr
en
cie
s a
re p
osi
tive
ly c
orr
ela
ted
. H
en
ce, t
he
w
ors
t-ca
se c
orr
ela
tio
ns
ass
um
pti
on
use
d b
y SA
-CC
R
resu
lts
in a
co
nse
rva
tive
est
ima
te o
f th
e E
AD
. CE
M a
nd
SA
-C
CR
tre
at
the
P/R
an
d R
/P p
ort
folio
s e
qu
iva
len
tly
(th
e o
ff-
dia
gon
al t
erm
s a
re s
ymm
etr
ic)
18
no
v 2
01
5D
NB
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E-F
IKA
24
No
w 2
ccy
’s
NE
XT
CO
MPA
RIS
ON
•D
iffe
ren
t a
sse
t ty
pe
s IR
S &
FX
an
d 3
me
tho
ds
(CE
M,
IMM
si
mp
listi
c (1
fa
cto
r),
SA-C
CR
) u
sin
g b
oth
co
llate
raliz
ed
as
we
ll a
s u
nco
llate
raliz
ed
•Fi
rst
IR
18
no
v 2
01
5D
NB
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E-F
IKA
25
Rig
ht a
nd le
ft: U
ncol
late
raliz
ed v
ersu
s co
llate
raliz
ed(M
PO
R=
10d)
EA
D f
or a
EU
R A
TM
IRS
for
diff
eren
t mat
uriti
es u
sing
SA
-C
CR
, CE
M a
nd IM
M.
Con
clus
ion:
The
red
line
s ar
e a
refle
ctio
n of
the
step
wis
e ta
ble
wei
ghts
(P
FE
%)
of th
e C
EM
SA
-CC
R g
ives
hig
her
EA
D to
Lon
ger
date
d IR
com
pare
d to
CE
MS
A-C
CR
is m
ore
clos
e to
IMM
(al
thou
gh IM
M is
a s
impl
istic
ver
sion
)
fx
18
no
v 2
01
5D
NB
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E-F
IKA
26
Rig
ht a
nd le
ft pa
nels
: Unc
olla
tera
lised
and
colla
tera
lised
(MP
OR
=10
d)
EA
D fo
r a
com
bine
d E
UR
and
US
D F
X-F
WD
AT
M f
or d
iffer
ent
mat
uriti
es u
sing
SA
-CC
R, C
EM
and
IMM
.
The
red
line
s ar
e a
refle
ctio
n of
the
step
wis
e ta
ble
wei
ghts
(P
FE
%)
of
the
CE
MS
A-C
CR
giv
es lo
wer
EA
D to
Lon
ger
date
d F
X-F
WD
com
pare
d to
CE
M,
espe
cial
ly fo
r co
llate
raliz
ed F
X-F
WD
SA
-CC
R is
mor
e cl
ose
to IM
M (
alth
ough
IMM
is a
sim
plis
tic v
ersi
on)
take
aw
ays
•In
cre
ase
in e
xpo
sure
fo
r si
ng
le t
ran
sact
ion
s o
r n
on
-div
ers
ifie
d,
un
colla
tera
lize
d p
ort
folio
s
•A
lmo
st p
erf
ect
ly h
ed
ged
po
rtfo
lios
low
er
exp
osu
re b
y o
ffse
ttin
g
ad
d o
ns
•M
arg
ine
d t
ran
sact
ion
s u
sua
lly h
ave
low
er
exp
osu
re
•T
he
act
ua
l ou
tco
me
de
pe
nd
s ve
ry m
uch
on
th
e d
eri
vati
ves
po
rtfo
lio
of
an
inst
itu
tio
n
18
no
v 2
01
5D
NB
-OSB
E-F
IKA
27
•Q
ue
stio
ns?
18
no
v2
01
5D
NB
-OSB
E-F
IKA
28