It took two students, over a hundred training engagements in 6 markets and a life working with risk and finance to change my mind.

2007 was a good year in many ways. It was also the year when Abbas Qureshi at SP Jain, Dubai and Adnan Iqbal at Deloitte Consulting, DC asked me the same thing. “Can you please start putting up your training materials online? There are tons of individual out there who would pay good money to let you teach them online.” I wasn’t sure if I was the video guy, if we had the bandwidth or if I really wanted to do this. Two previous attempts to record workshops had worked but with disastrous results.

While Finance Training Courses was a first step in this direction, Adnan and Abbas both felt that something along the lines of Khan Academy would be a lot more useful. There is only so much you can read and a good instructor with a good deck can simply beat plain text hands down. While I wasn’t sure if such a model would ever take off financially, Salman Khan quickly became the inspiration and the guide on the path for putting videos online.

About two months ago we started thinking about putting our slide decks online for the most popular courses on the Finance Training Course portal. The first milestone was investigating WordPress capabilities (you can do about 50 meg per video per post using wordpress), a search on tablets and the tools of choice used by Salman Khan (Wacom Fun Touch Bamboo versus the Genius much cheaper and larger pen only tablet), the software required (Camtasia by Techsmith) for the work Salman has done and we were there.

The first video on liquidity risk management took over a week to plan. While the content had been around for a while, it took me a while to convince myself that I was finally ready to put videos online. Something we had always talked about but never done. The Quant Crash Course took even longer. While the first course on liquidity was just the proof of concept, the second was supposed to be the real thing. This evening we put the first episode of the four part quant crash course online. Hopefully before I head out to Abu Dhabi on Tuesday the whole series will be up and running and available for sale.

Ever since we started preparing ICAAP (Internal Capital Adequacy Assessment Process) submission reports the two areas where clients had the most questions dealt with estimation of internal capital for strategic and liquidity risk. One client went as far as saying that I don’t want to discuss Pillar I at all. I understand Pillar I. It is Pillar II reporting and risk that is giving me reporting nightmares. Specifically ICAAP Liquidity Risk and Strategic Risk Capital.

Here are two posts done earlier on Finance Training Courses for our clients related to these two missing links:

ICAAP: Estimating Liquidity Risk Capital for ICAAP

ICAAP: Estimating Strategic Risk Capital for ICAAP

Jawwad Farid is a Columbia Business School Alumni, a Fellow Society of Actuaries and the Founder CEO of Alchemy Technologies. Jawwad has been teaching and working with the banking industry on ICAAP frameworks and submissions from early 2007 when the Basel II framework was rolled out in the region. For more detailed material on ICAAP prepared by the same team, please see  Sample ICAAP report templates, ICAAP Excel worksheets and a primer on ICAAP as well as our ICAAP Training workshop series scheduled for late March 2011 in Langkawi, Malaysia. 

Two ICAAP training workshops, three days, one magical location. Our second set of workshops covering exotic financial topics in breathtaking tropical locations.

A focus on ICAAP – Pillar II risks primarily ALM and Liquidity Risk Capital using Interest Rate Simulations. The two day main event is preceded by a single day foundation workshop on Internal Capital Adequacy with a focus on treasury, market and counterparty risk management. For details, please see the main training workshop pages below.

ICAAP Training Workshop – Treasury, Market and Counterparty Risk Foundation Workshop – 29^th March, 2011

ICAAP Models Training Workshop: ALM, Liquidity and Interest Rate Simulation Workshop – 30^th, 31^st March, 2011

Discount available for early registration and multiple nominations from the same institution. Book online using Google Checkout or directly with LSW in Malaysia. Local discounted rates available for a limited time for participants from Malaysia, Singapore, Thailand and existing LSW and Alchemy customers. Please see ICAAP training workshop brochures for more details.

ALM and Liquidity Management Training Workshop

This advanced level ALM and Liquidity Training workshop serves as a refresher to liquidity management, with an emphasis on traditional models including gap analysis and earnings at risk, stress testing, scenario planning, policy making and simulations. Our first joint venture finance training workshop in Kula Lumpur with our Malaysian Partners LSW International scheduled for 27^th and 28^th January, 2011. 30 minutes from Kula Lumpur at the Holiday Villa Resort in Subang, Malaysia.

ALM Training Workshop Learning objectives

At the end of this workshop the participants will be able to:

1. Work with the primary tools required to measure and manage ALM risk profile of a financial institution
2. Measure liquidity and quantify the effectiveness of traditional measurement tools.
3. Use scenario based methods, stress testing and simulations to highlight your ALM and liquidity risk profile.
4. Develop assumptions for testing Maturity mismatch and liquidity risk for Internal Capital Adequacy Assessment.
5. Assess and evaluate existing liquidity policies and contingency plans.

About ALM and Liquidity Management Workshop location and facilities

The Holiday Villa Subang is a premier business resort offers an ideal getaway for business and leisure. The Hotel is set on 6.8 acres of beautifully landscaped land overlooking a pristine lake while incorporating the luxuries of modern facilities. Its features 383 spacious guestrooms equipped with modern amenities, 10 food and beverage outlets that offer guests a choice of global cuisine, 18 convention and meeting facilities including three ballrooms and finally, a comprehensive range of sports and recreational facilities including an Olympic-sized swimming pool.

ALM Training workshop level: Intermediate and advance users. This advance level workshop is aimed at individuals responsible for asset liability management and risk management within banks, insurance companies and mutual funds. Familiarity with basic liquidity concepts, local markets, portfolio management and the Basel II framework. All participants are requested to arrange Laptops with a functional version of Microsoft Excel.

ALM and Liquidity Training Workshop Course OutlineLiquidity and ALM Models: Overview and introduction. Key terms and concepts. Duration, Convexity, Maturity mismatch, measuring mismatch, ALM models, assumptions and drivers. Basic tools – Price and Maturity GAP, MVE and NPV Analysis, Net Interest Income, Earnings at Risk, Cost to Close and Liquidity.

BancOne Case Study:

ALM and Liquidity Policies and Simulation: Structure, Policies, Tools, Stress tests, ICAAP and Scenario analysis for Liquidity. Building the contingency funding plan.

Facilitator profile

Jawwad Farid is the founder and CEO of Alchemy Technologies, an enterprise risk practice that builds and deploys risk, treasury, ALM, ICAAP, market and credit risk platforms. He is a Fellow Society of Actuaries (Chicago), a MBA from Columbia Business School (New York City) and a computer science graduate. During the last 18 years, he has worked as a consultant in North America, Pakistan and the United Kingdom with a number of blue chip clients including Hartford Life, Aegon, American General, Goldman Sachs, ING, Manu Life, Safeco, Merrill Lynch, Met Life, Sun America, Nationwide, Phoenix Life, Sumitomo Mitsui Bank, Sun Life of Canada, Pacific Life, AllState, Fidelity Investments, Transamerica, Skandia, GE Financial Assurance, Lincoln National, Ohio National, AXA Equitable and Washington Mutual Bank.

Jawwad’s core areas of expertise include Asset/Risk Management, Investments, Product Development and the Financial Services Back Office. Jawwad blends a rare combination of risk management, information systems, international standards, business and product development skill set side by side with his actuarial expertise. His regional client list includes Asian Development Bank, First Gulf Bank, Riyad Bank, Dubai Islamic Bank, Noor Islamic Bank, Dubai Bonds, Deutsche Bank, State Bank of Pakistan, National Bank of Pakistan, Muslim Commercial Bank, Crescent Commercial, MyBank, Dawood Islamic Bank, KASB Bank, United Bank Limited, Pak-Kuwait Investment, Saudi Pak Commercial Bank, ABN AMRO, InvestBank, Invest Capital Markets, State Life Insurance, Dawood Family Takaful, Asia Health Care, Adamjee Insurance, Shell Pakistan, International General Insurance and Securities and Exchange Commission of Pakistan. Jawwad is also a regular contributor to the Learning Corporate Finance portal as well as on the SP Jain platform where he teaches courses on Entrepreneurship, Risk Management and Derivative pricing to executive MBA students in Dubai and Singapore.

Jawwad’s expertise includes:

• Appointed actuary.
• ALM, Liquidity Management and ICAAP.
• Risk based capital, investment and portfolio optimization strategies.
• Fixed Income, Foreign Exchange and Commodities (Oil) research.
• Basel II market, credit and operational risk management framework.
• Probability of Default modeling and Days Past Due analysis.
• Centralized or distributed Middle & Back office design, review, integration, assessment and deployment for banks, brokerage, mutual funds, and insurance companies.
• Derivative pricing, application and usage.
• Valuation of contingent products, benefits and solutions in investments, portfolio management, life insurance, general insurance, finance and risk.
• Development and conduction of individual and institutional skill development & capacity building programs.

For more details, pricing, registration and multi nomination discounts please contact

M. Shakila shakila@lswinternational.com or Leonard (leonard@lswinternational.com)

LSW International Sdn. Bhd. (765510-K)

623, Block B, Mentari Business Park

Jalan PJS 8/5, Bandar Sunway

46150 Petaling Jaya, Selangor Darul Ehsan

MALAYSIA.

Tel         :+603 5637 2379

Fax        :+603 5637 0366

Weighted Average Cost of Capital (WACC) is an important input in the process used for determining the value of a firm. In our Corporate Finance First Course we visit this concept as well as the concept of Beta which is an essential ingredient in the Cost of Equity calculation part of the WACC equation. In particular the following two sessions discuss these topics in detail:

1. Finance Training Course: Corporate Finance: Opportunity Cost and Cost of Capital
2. Finance Training Course: Corporate Finance: Beta, Calculating WACC or Weighted Average Cost of Capital

These concepts as part of a business valuation exercise are more clearly explained through the following two case studies:

1. Finance Training Course: Advanced Micro Devisces (AMD) Corporate Finance case study
2. Finance Training Course: Electronic Arts (EA) Corporate Finance case study

Finally we look at how Beta may be re-levered to address situations where a firm’s capital structure has undergone change or where data for determining beta for firms will similar business risk is more readily available than for the firm being valued.

Corporate Finance Training Course: WACC: Calculating weighted average cost of capital: Relevering Beta

Between the two introductory concepts, the two comprehensive cases and the Relevering Beta post above you now have everything you ever needed to learn about Beta within the context of corporate finance and investment banking valuations.

1. Finance Course Store | Finance Training Courses – 453 Views
   
2. Corporate Finance First Course | Finance Training Courses  – 256 Views
   
3. ICAAP Internal Capital Adequacy Assessment Sample ICAAP report format and table of content | Corporate Finance Training Courses – 248 Views
   
4. The Derivatives Crash Course for Dummies | Finance Training Courses  – 192 Views
   
5. Calculating Forward Prices, Forward Rates and Forward Rate Agreements (FRA) Calculation reference | Corporate Finance Training Courses – 179 Views
   

The top posts on Finance Training Courses this month in December 2010 directly from Google Analytics. The finance training course store is getting good traction, followed by the first course in corporate finance for finance neophytes, followed by our most popular download on ICAAP. In terms of Click Through (CTR) traffic, the calculating forward rates reference has the highest CTR of over 20%.

Duration & Convexity Calculation Example

While mathematically speaking duration and convexity are simple topics, somehow Risk heads and Quants in general have a difficult time explaining both to retail banking, senior executive teams and board members. I thought a working example of duration and convexity illustrating the differences between Macaulay, Modified and Effective Duration side by side with an illustration of Convexity would help the cause. We may still lose the battle for hearts and minds when it comes to these two topics but we would know that we had tried.

In the posts that follow we will look at the specific mechanics of the Duration (i.e. Macaulay Duration, Modified Duration and Effective Duration) and Convexity calculations.

Duration, Convexity calculation example: Working with Macaulay & Modified Duration
Duration, Convexity Calculation Example: Working with Effective Duration
Duration, Convexity Calculation Example: Working with Convexity and Sensitivity
Interest Rate Risk: Convexity
Duration, Convexity and Asset Liability Management – Calculation reference

For a more advanced understanding of Duration & Convexity and its application in a banking setting please see the Asset Liability Management – The ALM Crash course and survival guide.

If you would like to buy this example as an excel file, please see the Computational Finance section at our online finance course store. The online finance course store  includes easy-to-read-and-work-with downloadable pdf files, excel templates and ready-to-work with models that are shared to illustrate usage and speed up learning for advanced financial modeling, forecasting and simulation topics including interest rate forecasting and simulation, value at risk analysis, credit analysis and processes, Internal Capital Adequacy Assessment Process (ICAAP), asset liability management and other related middle office and risk and computational finance topics.

The ICAAP (Internal Capital Adequacy Assessment) Roadmap post reviews the core topics in a crash course format for Internal Capital Adequacy Assessment. The hope is that armed with the relevant context, historical background and tools we would be able to do a better job of informing our boards of expected as well as unexpected capital shortfalls.

We start off with Interest Rate Simulations, followed by a laundry list of topics related to ICAAP, followed by a review of collateral risk management (you would have never thought that a foray in ICAAP would land you on this particular road). Without further ado…

Interest Rate Simulation Crash Course

Whether its mark to market pricing of treasury investments, calculation of interest rate shocks for stress testing, configuring a probability of default model, a conditional transition matrix or valuation of collateral, you ultimately have to turn towards interest rate modeling if you are serious about ICAAP analysis. Interest rate models are defined by state variables and their processes. Think of these are the primary drivers or factors behind a given phenomenon. Just like pressing the accelerator changes and impact speed of a vehicle, tweaking a model parameter or model variable changes the value being simulated.

The values taken by the state variables that constitute an interest model give the position or state of the item being model. The processes determine how the state variables change over time. Interest rate processes or changes in state variables are usually stochastic processes, i.e. they incorporate an element of randomness. These processes can usually be divided into a non-random deterministic component, called drift and a random, noise term called volatility.

Interest Rate Simulation: Introduction

Model processes may depend on the evolution of a single factor such as the short rate, as in the case of the CIR one factor equilibrium model. We start with the simplest of interest rate models, the Cox Ingersoll Ross interest rate simulator and review the model as well as the steps required in its calibration.

Interest Rate Simulation: Using CIR (Cox Ingersoll Ross) Model: Introduction
Interest Rate Simulation: Using CIR (Cox Ingersoll Ross) Model: Estimating Parameters & Calibrating the CIR Model
Interest Rate Simulation: Using CIR (Cox Ingersoll Ross) Model: Simulating the term structure of interest rates

Interest Rate Simulation Models: Building BDT in Excel: Introduction
Interest Rate Simulation Models: Black, Derman and Toy (BDT) model in Excel: Define Input Cells
Interest Rate Simulation Models: Black, Derman and Toy (BDT) in Excel: Define Output Cells
Interest Rate Simulation Models: Black, Derman and Toy (BDT) model in Excel: Define Calculation Cells: Construct short rate binomial tree
Interest Rate Simulation Models: (BDT) model in Excel: Define Calculation Cells: Construct State Price Lattices
Interest Rate Simulation Models: (BDT) model in Excel: Calculate Prices from Lattice
Interest Rate Simulation Models: (BDT) model in Excel: Calculate Yields & Yield volatility from Lattice
Interest Rate Simulation Models: (BDT) model in Excel: Define & Set Solver Function & Results
Interest Rate Simulation Models: (BDT) model in Excel: How to utilize the results of a BDT interest rate model: Derivation of Short Rates
Interest Rate Simulation Models: The results of a BDT interest rate model: Pricing Bonds
Interest Rate Simulation Models: The results of a BDT interest rate model: Pricing Options

Interest Rate Simulation Models: HJM (Heath Jarrow Merton) Model: Define input cells
Interest Rate Simulation Models: HJM (Heath Jarrow Merton) Model: Interest Rate Model in Excel – Define calculation cells
Interest Rate Simulation Modeling: HJM (Heath Jarrow Merton) Model: Interest Rate Model in Excel – Determine Prices

Interest Rate Forecasting: Principal Component Analysis (PCA): Overview
Interest Rate Forecasting: Principal Component Analysis (PCA): Data
Interest Rate Forecasting: Principal Component Analysis (PCA) : Principal Component Analysis in Excel: Covariance Matrix
Interest Rate Forecasting: Principal Component Analysis (PCA): Eigenvectors
Interest Rate Forecasting: Principal Component Analysis (PCA): Diagonal Matrix
Interest Rate Forecasting: Principal Component Analysis (PCA): Solver Setup & Results

Internal Capital Adequacy and Assessment Process (ICAAP): Basel II – Background: Great Depression, Regulation Q, Basel I
Internal Capital Adequacy and Assessment Process (ICAAP): Basel II

One forward looking aspect of the Internal Capital Adequacy and Assessment Process (ICAAP) is stress testing of all risk factors in order to arrive at the capital requirements for the worst case scenario. Stress testing also allows the bank to plan and prepare for unexpected situations that may arise in the future. We look at some of the stress tests that can be applied to credit, market and liquidity risk.

ICAAP Submission: Credit Risk: Stress Test: Non – Performing Loan (NPL) Stress Test
ICAAP Compliance: Credit Risk: Stress Test: Simple Sensitivity Analysis – Increase & Shift in NPL
ICAAP Compliance: Credit Risk: Stress Test: Simple Sensitivity Analysis – Fall in Forced Sale Value (FSV) of mortgaged collateral
ICAAP: Credit Risk: Stress Test: How to construct a Transition Matrix
ICAAP: Credit Risk: Stress Test: How to Determine Expected Classification Rates
ICAAP: Credit Risk: Stress Test: Profitability Analysis of a bank’s loan portfolio
ICAAP: Credit Risk: Stress Test: Transition Matrix Stress Test
ICAAP: Credit Risk: Stress Test: Profitability Analysis Stress Test
ICAAP: Stress Test: Market Risk
ICAAP: Stress Test: Liquidity Risk

ICAAP: Process Requirements: Purpose, Pre-requisites, Board of Director Responsibilities and Documentation
ICAAP: Assessment Requirements: Approach, Nature , Comparative View to MCR and Review Process
Internal Capital Adequacy and Assessment Process (ICAAP): Report – main elements
ICAAP: Internal Capital Adequacy Assessment – Sample ICAAP report format and table of content

Internal Capital Adequacy and Assessment Process (ICAAP): Modeling Building Process
Internal Capital Adequacy and Assessment Process (ICAAP): Model Risks
Internal Capital Adequacy and Assessment Process (ICAAP): Prevention and Limitation of Model Risks

In order to quantify credit risk for the internal ratings based approach of the Internal Capital Adequacy and Assessment Process (ICAAP) the bank would need to be able to calculate the probability of default (PD). We discuss one methodology of calculating PD which is based on historical behavioral data.

ICAAP Submissions: Probability of Default (PD) Calculation

Collateral Valuation in Credit Risk Management

Stress testing, forced sale value modeling and credit risk mitigations are the three pillars that connect collateral valuation to ICAAP Analysis and modeling. Without incorporation of a sound collateral management, tracking and valuation model, there is a reasonable chance that your ICAAP numbers are completely disconnected from reality.

Estimation of collateral value is an important part of the process of quantifying Credit Risk. Valuations having a greater level of accuracy and reliability translate to Loss Given Default (LGD) estimates that are more in line with what is expected to be recovered. Inaccurate valuations would mean that more capital than anticipated will be used up as recoveries from the liquidation of collateral are lower and slower than expected so that losses and costs of recovery are higher.

In the Collateral Valuation course we first define collateral and list the various types available. We consider the desirable characteristics that are sought for in collateral and a number of performance measures for evaluating its effectiveness. We review how collateral can help in enhancing the financial intermediation process and the impediments and restrictions that exist when there is insufficient collateral or when law pertaining to collateral is un-reformed or ineffective:

Collateral Valuation: Credit Risk: Definition and Types
Collateral Valuation: Credit Risk: Extent of collateral & Performance indicators for collateral
Collateral Valuation: Credit Risk: Role of collateral in Financial Intermediation
Collateral Valuation: Credit Risk: Collateral and Collateral Law

Collateral Valuation: Credit Risk: Importance of collateral valuation to credit risk management
Collateral Valuation: Credit Risk: General principles
Collateral Valuation: Credit Risk: Real Estate Valuation Approaches
Collateral Valuation: Credit Risk: Sales Comparison Approach for real estate
Collateral Valuation: Credit Risk: Income Capitalization Approach for real estate
Collateral Valuation: Credit Risk: Cost Approach for real estate
Collateral Valuation: Credit Risk: Approaches for other assets

Collateral Valuation: Credit Risk: Security Interest – creation and perfection
Collateral Valuation: Credit Risk: Collateral Management of Security Interest
Collateral Valuation: Credit Risk: Enforcement of Security Interest
Collateral Valuation: Credit Risk: Termination or the extinguishing of Security Interest

If you would like to buy the complete course on collateral valuation as a PDF file, please see the Middle Office and VaR section at our online finance course store. The online finance course store  includes easy-to-read-and-work-with downloadable pdf files, excel templates and ready-to-work with models that are shared to illustrate usage and speed up learning for advanced financial modeling, forecasting and simulation topics including interest rate forecasting and simulation, value at risk analysis, credit analysis and processes, Internal Capital Adequacy Assessment Process (ICAAP), asset liability management and other related middle office and risk topics.

If you would like to buy this complete course as a PDF file or a Sample ICAAP report as a PDF file or the sample credit risk EXCEL sheet, please see the ICAAP section at our online finance course store. The online finance course store includes easy-to-read-and-work-with downloadable PDF files, excel templates and ready-to-work with models that are shared to illustrate usage and speed up learning and pick-up for advanced financial modeling, forecasting and simulation topics including interest rate forecasting and simulation, value at risk analysis, collateral valuation, asset liability management, ICAAP and other related middle office and risk topics.

Capital Adequacy was the principal message of the Basel II framework.  However a static regulator driven capital adequacy measure was deemed insufficient to manage the risk profile and capital requirements of an active bank in today’s risk environment creating the need for an internal and invasive assessment of the capital profile of a bank.  Ideally such a measure would allocate and attribute risk capital to all significant sources of risk, stress test the results and keep the board informed of any expected or projected capital shortfall.

Under Pillar 2 of the Basel II Accord, Internal Capital Adequacy and Assessment Process (ICAAP for short) was introduced with exactly the same objectives.

Under ICAAP requirements a bank needs to have in place internal procedures and processes to ensure that it possesses adequate capital resources in the long term to cover all of its material risks. These processes and procedures together are known as the Internal Capital Adequacy and Assessment Process or ICAAP for short.

We first review the historical back ground behind the development of Basel II of which ICAAP is a part:

Internal Capital Adequacy and Assessment Process (ICAAP): Basel II – Background: Great Depression, Regulation Q, Basel I
Internal Capital Adequacy and Assessment Process (ICAAP): Basel II

We then review some of the requirements of the ICAAP process and consider the main sections of an ICAAP report. We also present an extract from a sample ICAAP report showing the Executive Summary and the Approaches used to quantify and aggregate risks.

ICAAP: Process Requirements: Purpose, Pre-requisites, Board of Director Responsibilities and Documentation 
ICAAP: Assessment Requirements: Approach, Nature , Comparative View to MCR and Review Process
Internal Capital Adequacy and Assessment Process (ICAAP): Report – main elements 
ICAAP: Internal Capital Adequacy Assessment – Sample ICAAP report format and table of content

Internal Capital Adequacy and Assessment Process (ICAAP): Modeling Building Process
Internal Capital Adequacy and Assessment Process (ICAAP): Model Risks
Internal Capital Adequacy and Assessment Process (ICAAP): Prevention and Limitation of Model Risks

In order to quantify credit risk for the internal ratings based approach of the Internal Capital Adequacy and Assessment Process (ICAAP) the bank would need to be able to calculate the probability of default (PD). We discuss one methodology of calculating PD which is based on historical behavioral data.

ICAAP Submissions: Probability of Default (PD) Calculation

One forward looking aspect of the Internal Capital Adequacy and Assessment Process (ICAAP) is  stress testing of all risk factors in order to arrive at the capital requirements for the worst case scenario. Stress testing also allows the bank to plan and prepare for unexpected situations that may arise in the future. We look at some of the stress tests that can be applied to credit, market and liquidity risk.

ICAAP Submission: Credit Risk: Stress Test: Non – Performing Loan (NPL) Stress Test
ICAAP Compliance: Credit Risk: Stress Test: Simple Sensitivity Analysis – Increase & Shift in NPL 
ICAAP Compliance: Credit Risk: Stress Test: Simple Sensitivity Analysis – Fall in Forced Sale Value (FSV) of mortgaged collateral 
ICAAP: Credit Risk: Stress Test: How to construct a Transition Matrix 
ICAAP: Credit Risk: Stress Test: How to Determine Expected Classification Rates 
ICAAP: Credit Risk: Stress Test: Profitability Analysis of a bank’s loan portfolio 
ICAAP: Credit Risk: Stress Test: Transition Matrix Stress Test 
ICAAP: Credit Risk: Stress Test: Profitability Analysis Stress Test 
ICAAP: Stress Test: Market Risk 
ICAAP: Stress Test: Liquidity Risk

If you would like to buy this complete course as a PDF file or a Sample ICAAP report as a PDF file or the sample credit risk EXCEL sheet, please see the ICAAP section at our online finance course store. The online finance course store includes easy-to-read-and-work-with downloadable PDF files, excel templates and ready-to-work with models that are shared to illustrate usage and speed up learning and pick-up for advanced financial modeling, forecasting and simulation topics including interest rate forecasting and simulation, value at risk analysis, collateral valuation, asset liability management, ICAAP and other related middle office and risk topics.

Once upon a time Interest Rate Modeling was treated as an exotic topic reserved for the truly driven quants amongst us. In today’s interest rate environment it has become an essential skill set necessary for traders, treasurers and risk managers. Based on feedback and requests from a number of clients, I am pleased to announce our second hands on interest rate modeling workshop for both quant and non-quantitative audiences. The workshop date has now been moved to 28^th and 29^th December 2010 on account of a change in my travel schedule to the Middle East.

The workshop is aimed at treasury, risk and fixed income investors who use interest rate forecasting tools for arbitrage, ALM, risk or credit policy decisions. Teaching methodology is based on intensive hands on model building and application cases.

The workshop covers four different families of interest rate models starting with the simplest CIR (Cox, Ingersoll & Ross) and finishing up with the multi-factor HJM model. We then look at applications of the same models in Asset Liability Management, Fixed Income Arbitrage, monetary policy announcements and predicting unexpected interest rate shocks. A final session extends the analysis to a macro economic model of the economy using core interest rate drivers and Monte Carlo simulation.

By the end of this workshop participants will be able to:

• Use models to identify fixed income arbitrage opportunities in treasury term structure
  
• Build basic and advance interest rate models in excel for forecasting and extrapolating interest rates across the full range of maturity tenors
  
• Review the impact of external shocks (such as oil prices) on domestic interest rate environment and monetary policy
  
• Review interest rate inputs for ALCO meetings as well as ALM models.
  

The packaged workshop represents an integrated skill building exercise that combines concepts with practical hands on application and is aimed at professionals who deal with pricing, valuation and portfolio management issues related to fixed income products in Pakistan.

Interest rate models: Outline

3.0 Facilitator profile

Jawwad Ahmed Farid is a Fellow Society of Actuaries (Chicago), a MBA from Columbia Business School (New York City) and a computer science graduate. During the last 18 years, he has worked as a consultant in North America, Pakistan and the United Kingdom with a number of blue chip clients including Hartford Life, Aegon, American General, Goldman Sachs, ING, Manu Life, Safeco, Merrill Lynch, Met Life, Sun America, Nationwide, Phoenix Life, Sumitomo Mitsui Bank, Sun Life of Canada, Pacific Life, AllState, Fidelity Investments, Transamerica, Skandia, GE Financial Assurance, Lincoln National, Ohio National, AXA Equitable and Washington Mutual Bank.

Jawwad’s core areas of expertise include Asset/Risk Management, Investments, Product Development & the Financial Services Back Office. Jawwad blends a rare combination of risk management, information systems, international standards, business and product development skill set side by side with his actuarial expertise. His regional client list includes First Gulf Bank, Riyad Bank, Dubai Islamic Bank, Noor Islamic Bank, Dubai Bonds, Deutsche Bank, State Bank of Pakistan, National Bank of Pakistan, Muslim Commercial Bank, Crescent Commercial, MyBank, Dawood Islamic Bank, KASB Bank, United Bank Limited, Pak-Kuwait Investment, Saudi Pak Commercial Bank, ABN AMRO, State Life Insurance, Dawood Family Takaful, Asia Health Care, Adamjee Insurance, Shell Pakistan, International General Insurance and others.

For more information, please contact

Jawwad Farid, Uzma Salahuddin at:

Alchemy Technologies (Pvt.) Ltd.

166 Block 7/8, KMCHS, Karachi

Phone: +9221 3 455 64 31 / 52 Fax: +9221 3 455 6447

Email: jawwad@alchemya.com,
uzma@alchemya.com,

Web: www.alchemya.com, Learning Corporate Finance