Capital Management under Basel III and CRDIV course will specifically cover topics in counterparty risk including Basel III / CRDIV Capital Requirements, the Internal Model Method (IMM), Collateralised Monte Carlo, Central Clearing and Capital Management in the new regulatory landscape.
In the wake of the financial crisis, Basel III, CRD IV and central clearing regulatory reforms have dictated a steep increase in the capital cost of bilateral OTC derivative trades.
Central counterparty clearing houses (CCP's) are now viewed as the main tool to mitigate counterparty credit risk, and the new credit value adjustment (CVA) capital charge has also been introduced for non-cleared derivatives. Moreover, transactions cleared through CCPs benefit from less stringent capital requirements.
In this new regulatory environment, successful firms willing to achieve a competitive profit-to-capital ratio will re-shape their OTC derivatives portfolio significantly. This will involve migrating trades to clearing platforms, increasing collaterised transactions and overcoming the funding challenge of a steadily growing demand for high quality collateral. In addition to the actual capital management framework, firms will also need to ensure their risk infrastructures are up to the task.