|Course Code: 722
|Duration: 1 day
|CPE Credits: 6
|Prerequisite: Understanding of OTC Derivatives and Securities Lending is recommended (but not required).
For both Derivatives and Securities Lending business units, Collateral Management is the cornerstone of Counterparty Credit Risk Management. Recent market events and trends highlight the importance of the effective use of collateral as a credit risk management tool. This one-day course provides a detailed look at the Middle Office and Operations functions involved in Collateral Management.
The use of collateral in both Derivatives and Securities Lending transactions will be described. Critical terminology and documentation of collateral agreements such as CSA's will be explored. Participants will gain perspective on its place in the international financial markets today, as well as regulatory considerations, both for the U.S. markets and abroad.
The role of institutions, investment managers, banks, broker/dealers, custodians, prime brokers and industry organizations such as clearing houses and centralized securities depositories will be examined.
The program will also provide insight into the "Lessons Learned" from the financial crisis, and trends in Collateral Management such as collateral optimization and transformation.
Topics for discussion include:
Collateral Management Overview
- Purpose of collateral and its requirements in Derivatives and Securities Lending transactions
- Who are the parties involved in managing collateral?
- Relevancy for the Dealers, Institutions, Hedge Funds, Custodians and Prime Brokers
- What types of collateral are used and collateral profiles
- What agreements are used for managing collateral?
- Credit support documents
- Best practices and standards
- Enforceability of agreements
- Transfer of Title
Independent amounts (initial margin)
Haircuts (valuation percentage)
Minimum transfer amounts (MTA's)
Collateral Workflow: A Day in the Life of the Collateral Management Department
- Position Tracking and Timing
- Mark to Market of open positions subject to collateral agreements
- Daily monitoring of collateral positions
- Margin calculations
- Margin call notice
- Removing excess collateral and adding collateral
- How collateral movements are settled and where
- Reconciliation procedures
- Non delivery
- Escalation processes
Collateral Management - Issues and Trends