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Risk Management Training Programs

Fundamentals of Counterparty Risk

Get introduced to the key concepts of counterparty risk in market operations: current and potential exposure, EPE, CVA, DVA, FVA, collateral and margin management. This module also covers regulatory frameworks (SA-CCR) and the tools used by banks to assess and hedge the risk of potential counterparty defaults.

Réf: FOCR-205

IN-PERSON OR REMOTE CLASS

Duration

2 days

Additional activity

Remote

2,550 € VAT excluded

VAT exemption according to article 261-4-4° of the French Tax Code

Reference

FOQF-255

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(*) As a training organization, Finance Tutoring benefits from a VAT exemption under Article 261-4-4° of the French General Tax Code (CGI).

Training Description

Fundamentals of Counterparty Risk

2-day intensive training (14 hours) – Theoretical approach and concrete case studies

◆ Counterparty Risk Management Certification ◆

The Counterparty Risk training allows you to acquire an operational mastery of the methods for identifying, measuring, and managing risks related to counterparty defaults in financial transactions. A comprehensive training combining theory and practice to master the essential tools in market risk management.

◉ Current Context

In a post-financial crisis environment, this training addresses key challenges:

  • ► Strengthening of regulatory frameworks (Basel III/IV, EMIR)
  • ► Increased complexity of OTC derivative transactions
  • ► Growth in the role of central counterparties (CCPs)
  • ► Integration of ESG criteria in risk assessment

Pedagogical Content

1. Key Concepts and Mechanisms

  • Definition of counterparty risk
  • Bilateral vs. unilateral risk
  • Settlement and counterparty risk
  • Impact of financial crises
  • Historical case studies (AIG, Lehman)

2. Measurement and Modeling

  • Calculation of EAD and EPE
  • Potential Future Exposure (PFE)
  • Credit/Debt Value Adjustment (CVA/DVA)
  • Wrong-Way Risk (WWR)
  • Monte Carlo Simulation

3. Mitigation and Regulation

  • Netting and portfolio compression
  • Central Counterparties (CCPs)
  • Regulatory framework (Basel III/IV, EMIR)
  • Capital requirements (SACCR, IMM)
  • Innovations and trends (ESG, Blockchain)

Training Objectives

  • Understand the mechanisms of counterparty risk
  • Calculate key indicators (EAD, EPE, CVA)
  • Master simulation techniques
  • Apply mitigation methods
  • Identify Wrong-Way Risk
  • Integrate regulatory requirements
  • Analyze real cases of default
  • Optimize collateral management

Target Audience

Concrete Benefits by Profession

◉ Risk Managers

Refine your assessment and management methodologies:

  • ► Implementation of advanced quantification models
  • ► Development of relevant stress tests
  • ► Optimization of hedging strategies

◉ Compliance Officers

Master regulatory requirements and their application:

  • ► Compliance with Basel III/IV and EMIR standards
  • ► Preparation of accurate regulatory reports
  • ► Anticipation of regulatory changes

◉ Financial Analysts

Integrate counterparty risk into your analyses:

  • ► Precise evaluation of the impact on valuations
  • ► Understanding of Value Adjustments (XVA)
  • ► Integration of ESG criteria in risk analysis

◉ Derivative Traders

Optimize your strategies by integrating counterparty risk:

  • ► Pricing adjusted for counterparty risk
  • ► Optimization of collateral agreements (CSA)
  • ► Effective management of credit limits

◉ Finance Students

Acquire sought-after skills:

  • ► Mastery of fundamental concepts in market risk
  • ► Practical applications on real cases
  • ► Differentiating skills for the job market

◉ In-person/Distance Learning ◉ Training materials provided ◉ Training certificate ◉ Real practical case studies

Frequently Asked Questions

1. What are the prerequisites for this training? +

A basic understanding of derivatives and general finance principles is recommended. Some knowledge of statistics and financial risk management is a plus, but concepts will be explained progressively. The course is designed to be accessible to professionals with initial finance experience or Master's level students.

2. Does the training include hands-on computer exercises? +

Yes, several sessions are dedicated to practical work on Excel and Python. You will learn to concretely implement the calculations of EAD, EPE, CVA and to perform Monte Carlo simulations. Prepared notebooks will guide you step by step in implementing the theoretical concepts, even if you have no prior programming experience.

3. How does the training address regulatory aspects? +

The training dedicates an entire module to the regulatory framework with a detailed analysis of the requirements of Basel III/IV, EMIR, and Dodd-Frank. We examine the concrete impact of these regulations on the calculation of regulatory capital and the operational practices of risk management. Regulatory reporting templates are analyzed to understand reporting requirements.

4. Are the practical cases based on real situations? +

Absolutely. The training relies on real case studies such as the failure of Lehman Brothers, the AIG crisis, or recent situations of counterparty default. These concrete cases illustrate the theoretical concepts and analyze the lessons learned for current counterparty risk management. You will also work on anonymized but realistic portfolios for your exercises.

5. How does this training adapt to recent market developments? +

Our training integrates the latest trends such as the impact of ESG criteria on counterparty risk assessment and the use of blockchain technologies for automated collateral management. We also address the new SA-CCR calculation methods and the latest regulatory developments. The content is updated regularly to reflect current market practices.

Training Program

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 (loans), settlement risk vs. counterparty risk
  • Impact of financial crises: the role of CDS in the 2008 crisis (AIG case)

Case Study:

Analyzing 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)
  • Introduction to Potential Future Exposure (PFE) and mark-to-market impacts
  • Risk scenario simulation: Monte Carlo approach and stress testing

Case Study:

Manual calculation of EAD on an interest rate swap

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