New York Programme
Day one – Wednesday 13 October 2010
08:30 - Registration and coffee
- Historical development of model validation
- Late 1980’s – early 1990’s: uncertain beginnings
- Mid 1990’s: Pioneering quants press on
- Late 1990’s: the concept begins to take hold
- Post 9/11: enter the regulators
- 2005 – 2008: model validation comes of age
- Post 2008: global financial meltdown
- Case study: the agony and ecstasy of model validation
Jon Hill, Vice President, Head of Model Validation, Internal Audit Department, Morgan Stanley
10:30 - Morning break
11:00 - Model development and the model management framework at KBC
- Perspectives on model development
- Objectives of a model management framework
- Our initial implementation of a model management framework
- Case studies from structured finance, asset management, and proprietary trading
- Updates to the model management framework
- Current challenges:
- Comprehensive risk model development
- Validation for bespoke tranches.
Craig Wotherspoon, Executive Vice President, Head of Quantitative Analysis, KBC Financial Products
12:30 - Lunch
13.30 - Validating market risk models: a practical approach
- Market risk models: general, specific, incremental risk charge
- Market risk model components
- Validation of model components
- Risk factor identification and distributions
- Regulatory requirements
- Performance monitoring and backtesting procedures
Douglas Gardner, Managing Director, Head of Model Validation, Wells Fargo Securities
15:00 - Afternoon break
15:30 - Validating credit risk models: a practical approach
- The general framework for counterparty credit risk at the enterprise
level
- Structural models
- Reduced form models - The advantages and disadvantages of each types of models
- Structural models in a simple example
- The main inputs: PD, LGD, EAD, asset correlation, etc
- The estimation of the main inputs - Case study: validation of a credit risk model
- The validation of the framework
- The validation of estimation methods for inputs
- Model performance test
- Stress testing
Xiaozhong Liang, Vice President, Model Validation, State Street Corporation
17:00 - End of the day
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Day two – Thursday 14 October
08:30 - Registration and coffee
09:00 - Validation of internal models required by regulators
- Internal models for market risk : the old and the new
- Focus on the new internal models for market risk on the trading book
- Internal models vs. valuation/risk-management models
- Risk-driven internal models : the use test
Jerome Brun, Head of Model Validation, Market Risk, Société Générale
10:30 - Morning break
11:00 - Model risk and its presence in FX derivatives
- Model risk and risk management
- Time scales and models
- Liquidity model limitations
- Which model should we use?
- Model risk, model reserves, and bid-offer spreads
- Models and Parameters
- Model quality assurance validation and model risk
- Goals and procedures for model quality assurance validation
- Case studies: FX derivatives
Jan Dash, President, J. Dash Consultants LLC
12:30 - Lunch
13:30 - Validation of credit default swaps (CDS)
- Overview of standard model - JP Morgan
- Inputs to the model: yield curves, credit spread curve and recovery rate
- Good profit and loss examined:
- Theta
- Par rate delta
- Credit delta
- Credit gamma
- Recovery delta
- Recovery gamma
- Cost of funding
- Cost of tenor sensitivity - Risk sensitivity should be given in terms of market observable CDS
- Review of new CDS ISDA trading conventions
Sanja Hukovic, Head of EMEA Model Review, UBS
15:00 - Afternoon break
15:30 - Model validation for equity derivatives
- Regulatory mandates and guidance
- Model validation and model risk for equity derivatives: various views and goals
- Approaches to model validation for equity derivatives
- Review of model theory and modeling approaches
- Model implementation, reviews and tests
- Process and (Input) data reviews
- Reviews of actual model use and purpose
- Benchmark against other modeling and implementation choices
- Testing environments for pricing systems, validations, and benchmarking - Example case study
Bernhard Hientzsch, Director, SIG Model Validation & Approval, Wells Fargo Securities
