Risk Management Training Programs
The Fundamentals of Counterparty Risk
Réf: FOCR-205
The Fundamentals of Counterparty Risk
IN-PERSON OR REMOTE CLASS
Duration: 2 days (14 hours)
➕ Remote learning activity
2050,00 € VAT Exempt (*)
📌 Reference: FOCR-205
(*) As a training organization, Finance Tutoring benefits from a VAT exemption under Article 261-4-4° of the French General Tax Code (CGI).
Course Description
Fundamentals of Counterparty Risk
Intensive 2-day training (14 hours) – Theoretical approach and real-world case studies
The Fundamentals of Counterparty Risk training provides a deep understanding of the mechanisms and challenges involved in managing counterparty risk in financial transactions, with a particular focus on derivatives, loans, and structured finance products.
◉ Current Context
In a constantly evolving regulatory environment (Basel III/IV, EMIR, SFTR), this course addresses the growing needs of financial institutions in:
- Mastering capital requirements (CET1, RWA)
- Managing liquidity ratios (LCR, NSFR)
- Ensuring compliance with international standards
Learning Content
1. Core Concepts
- Potential Future Exposure (PFE)
- Credit Value Adjustment (CVA/DVA)
- Margin mechanisms (VM/IM)
2. Regulatory Aspects
- Basel III/IV requirements
- EMIR/SFTR reporting
- Pillar 3 and transparency
3. Case Studies
- Simulations on OTC derivatives
- Collateral calculations
- RWA optimization
Learning Objectives
- Master counterparty risk calculation methodologies (PFE, CVA)
- Implement collateral management strategies
- Analyze the impact of Basel regulations on operations
- Optimize regulatory reporting processes
- Anticipate ESG and technological developments
- Solve real-world counterparty risk management cases
Target Audience
◉ Available both in-person and online ◉ Training materials provided ◉ Certificate of completion
Training Program
The Fundamentals of Counterparty Risk
I. Key Concepts and Basic Mechanisms
- Definition of counterparty risk and distinction from traditional credit risk
- Conceptual nuances: bilateral risk (derivatives) vs. unilateral risk (loans), settlement risk vs. counterparty risk
- Impact of financial crises: the role of CDS in the 2008 crisis (AIG case study)
Practical Case:
Analyze a derivatives portfolio to identify counterparty risk.
II. Measurement and Calculation of Counterparty Risk
- Calculation of Exposure at Default (EAD) and Expected Positive Exposure (EPE): estimating exposure at default
- Introduction to Potential Future Exposure (PFE) and the impact of mark-to-market
- Risk scenario simulations: Monte Carlo approach and stress tests
Practical Case:
Manual calculation of EAD on an interest rate swap.
III. Modeling and Complex Risks
- Identification of Wrong-Way Risk (WWR): correlation between exposure and default probability
- Advanced models: Credit Value Adjustment (CVA) and Debt Value Adjustment (DVA)
- The role of collateral and guarantees: Credit Support Annex (CSA) and margin call dynamics
Practical Case:
Calculate CVA using Excel/Python.
IV. Mitigation and Legal Framework
- Risk mitigation instruments: bilateral and multilateral netting, portfolio compression
- Central Counterparties (CCPs): advantages and limitations in risk management
- Collateral optimization strategies and funding costs
Practical Case:
Analysis of Lehman Brothers' bankruptcy and its impact on CCPs.
V. Regulatory Context and Compliance
- Key regulations: Basel III/IV, capital requirements (SA-CCR, IMM), CVA charge
- Comparison of regulatory frameworks: Dodd-Frank (US) vs. EMIR (EU)
- Stress testing and reporting: regulatory scenarios (BCBS, EBA)
Practical Case:
Complete an SFCR/FRTB report on counterparty risk measurement.
VI. Innovations and Trends
- Impact of ESG standards on counterparty evaluation and risk management
- Blockchain and smart contracts for automated collateral management
Practical Case:
Analyze the impact of ESG criteria on counterparty risk assessment in a financial asset portfolio.
Test Your Knowledge!
Assess your knowledge and enhance your learning.
- ✅ Identify your strengths.
- ✅ Focus on key concepts.
- ✅ Improve your efficiency!
📌 Dive Deeper into the Topic
Want to better understand risk management mechanisms and their application in financial risk management? Explore our detailed articles:
📖 Understanding Wrong-Way Risk in Simple Terms 📚 Understanding Funding Value Adjustment in Simple Terms