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BTRM Webinar: Counterparty Credit Risk for Derivatives: 14.00 GMT

Counterparty credit risk for derivatives by Dr Andreas Ita, Faculty BTRM

Even in a centrally cleared, collateralised world, banks’ risk exposure to derivatives markets remain significant. “Know your risk” is as important to Boards, EXCOs and CROs as ever. BTRM Faculty member Andreas Ita notes how unusually large price movements in a volatile market can generate increased counterparty credit risk on derivative exposures that are potentially “unseen” until it’s too late. The webinar will discuss:

  • Losses from the forced unwinding of collateralised equity swaps when a counterparty defaults can be a multiple of what is predicted by commonly used risk models and covered by initial margin;
  • The spike in energy prices in August 2022 showed that banks had, as clearers of their clients, many billions at risk;
  • The rise in UK gilt yields in September 2022 caused difficulties for UK pension funds to meet their margin requirements arising out of their derivatives positions and required the BoE to intervene

Large derivatives counterparty concentrations can be difficult to detect. Dr Ita presents a “lessons learned” for bank executives to incorporate into their risk management processes.

Andreas Ita:

Managing Partner at Orbit36 Risk Finance Solutions AG
Andreas Ita: Managing Partner at Orbit36 Risk Finance Solutions AG

Dr Andreas Ita is Managing Partner at Orbit36 Risk Finance Solutions AG, in Switzerland.He was latterly Head of Group Economic Performance and Capital Optimization at UBS AG, and prior to this worked for more than 10 years as an equity derivatives trader at UBS Investment Bank. Andreas holds a PhD and a Master in Banking and Finance from the University of Zurich, and a Bachelor in Business Administration from the Kalaidos University of Applied Science.

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