Sample projects

Developing targeted structured products

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?

For answers to the above questions please contact us.

Maximizing risk adjusted derivative revenue under Basel 3

Under Basel 3 banks are required to fully account for counterparty and funding costs on non-collateralised trades. Typical challenges include:

  • 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
  • equity tranche expected duration and corresponding interest rate that the bank may afford to pay?
  • How to take into account the non-normality of the risk factors?
  • What variance/covariance matrix inputs to use?