Market Risk Management
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Market Risk Management

Representative Engagements

In today’s volatile global financial marketplace, companies are increasingly focused on effective management of market and counterparty risks, which depend on product, activity, market and geographic region.

 

 

Market risk spans a wide range of risk areas, including:  interest rate risk when a bank borrows short and lends long; liquidity risk embedded in many insurance and fund products; and valuation risk arising in complex trading books such as credit derivatives and commodities or in the portfolios of unlisted investments.  In many cases, a market-related transaction also gives rise to a risk of counterparty default. In each of these areas our clients face an evolving set of industry best practices and regulatory expectations.

The strength of our practice is in knowing what best-practice market and counterparty risk management looks like and in understanding the expectations of supervisors.  Our team is comprised of highly-experienced professionals with a broad range of regulatory and industry experience in banks, investment advisers, hedge funds, investment companies, broker-dealers, financial market utilities, insurance companies, and others.

We have designed highly successful risk measurement and management frameworks for balance sheet management activities (funding, liquidity, interest rate risk management and securitization) and trading activities (rates, currencies, credit, equity, commodities, cash instruments and derivatives).  A current focus is changes in the regulatory environment, including central counterparty requirements and changes to counterparty credit risk measurement.

Our services include challenge and review of strategies; development of new product frameworks; assessment of the adequacy of governance and controls, including limit frameworks; review of the operational risks inherent in the trading environment; development of policies and procedures; stress testing; collateral management and margining; compliance with Basel III and other regulatory requirements; and review of valuation practices and risk modeling approaches such as value-at-risk and stressed value-at-risk.

Our clients benefit greatly from the gap analyses that we conduct with respect to their existing market risk management infrastructure and the supervisory or regulatory expectations.  The effective remediation of issues is another area where we have saved clients regulatory capital and real dollars in response to or anticipation of structural changes in the financial services industry. 

Representative Engagements

  • We worked with a global bank to assist in integrating a trading portfolio into that bank’s established market risk framework.
  • For an international bank, we reviewed that bank’s market risk framework and risk measurement approach against regulatory expectations and requirements to highlight gaps and suggest actions for closure.