Developing targeted structured products
Maximizing risk adjusted derivative revenue under Basel 3
Yield enhancement strategies for cash rich investors require a very good understanding of the client's investment objectives. Typical challenges include:
- How to define client risk appetite?
- What is an appropriate and suitable product in terms of exposure and payoff?
- When complexity adds value?
- What is the optimal product tenor?
- How to reconcile market expectations with past performance?
Optimising yield received on US XXX life insurance collateral note
Post credit crunch LOCs as a means of funding regulatory capital requirements on XXX business have lost their appeal. The provision of a securitised guarantee in the form of a collateral note was developed as a replacement of LOC funding. Typical challenges to the bank providing the note include:
- How to stress test the note for market and actuarial risks?
- How to specify the minimum risk adjusted yield required?
- How conservative the investor needs to be in the risk calculations?
- When it makes sense to suggest to clients to sign a CSA?
- What is the optimal threshold?
- How the product mix that the client transacts affects CSA negotiations?
- What is the cost of providing multi-currency facilities for collateral purposes?
Optimising interest paid on CASA deposits
Equity tranches of securitisations,
although are deposited on a demand account, have an expected duration that is greater from overnight. Typical challenges include:
- What stress factors to apply to the securitised assets for investigating the
- How to take into account the non-normality of the risk factors?
- What variance/covariance matrix inputs to use?