Introduction

In the modern financial landscape, Central Counterparties (CCPs) are the linchpins of stability, acting as a crucial intermediary for a vast range of financial transactions. By stepping in between buyers and sellers, CCPs manage and mitigate the risks of default, a role that has become increasingly vital since the 2008 financial crisis. However, the concentration of risk within these entities necessitates a sophisticated understanding of their own risk profile, including the potential for a CCP failure to trigger a systemic event. This advanced training course will equip you with the specialized skills to analyze and manage the unique risks associated with CCPs.

This comprehensive program provides a deep dive into the theoretical and practical aspects of Central Counterparty risk analysis. You will explore the intricate mechanisms of clearing, margin calls, and default fund management. The course emphasizes the quantitative and qualitative tools required to assess a CCP's resilience, including stress testing, model validation, and understanding the regulatory frameworks that govern them. By the end of this training, you will be proficient in evaluating the risks of transacting with a CCP, ensuring regulatory compliance, and contributing to the overall stability of the financial system.

Duration: 10 Days

Target Audience

• Financial risk managers
• Credit risk analysts
• Quantitative analysts
• Treasury and funding managers
• Portfolio managers
• Regulatory compliance officers
• Operations professionals
• Audit and assurance professionals
• Financial engineering students
• Public policy professionals

Objectives

• Understand the role and structure of CCPs.
• Master the mechanics of margining and collateral.
• Analyze the CCP default waterfall.
• Learn to conduct stress tests on CCPs.
• Understand the regulatory framework (e.g., CPSS-IOSCO).
• Evaluate the risks of clearing via a CCP.
• Model the interconnectedness of CCPs.
• Develop a framework for CCP risk analysis.
• Assess the risk of a CCP's non-default loss.
• Understand the role of CCPs in global markets.

Course Modules

Module 1: Foundations of CCPs

• The history and evolution of Central Counterparties
• The core functions of a CCP: netting, novation, and risk management
• The benefits of clearing for market participants
• The risks that CCPs introduce to the financial system
• The difference between cleared and uncleared transactions

Module 2: The Clearing Process

• The lifecycle of a cleared transaction
• The role of a clearing member and the client
• The process of trade submission and validation
• The legal and operational aspects of clearing
• The importance of straight-through processing

Module 3: Margining and Collateral

• The purpose and types of margin: initial and variation
• The process of margin calculation and collateral haircuts
• The role of collateral in mitigating risk
• The management of a collateral portfolio
• The impact of market volatility on margin calls

Module 4: The CCP Default Waterfall

• The first line of defense: defaulter's margin and collateral
• The second line of defense: the CCP's own capital
• The third line of defense: the default fund
• The fourth line of defense: assessment rights
• The final line of defense: regulatory backstops

Module 5: Default Fund Management

• The purpose and structure of a default fund
• The methodology for sizing the default fund
• The process for assessing and rebalancing contributions
• The management of a default fund's investments
• The role of the default fund in a stress scenario

Module 6: Risk Analysis Framework

• A qualitative and quantitative approach to risk analysis
• The key risk factors for a CCP
• The importance of stress testing and scenario analysis
• The role of model validation in risk assessment
• The governance of a CCP's risk management framework

Module 7: Stress Testing CCPs

• Designing a stress testing program
• Using stress tests to assess the adequacy of the default fund
• The role of historical and hypothetical stress scenarios
• The impact of stress on a CCP's liquidity and solvency
• Communicating stress test results to stakeholders

Module 8: The Regulatory Landscape

• An introduction to the CPSS-IOSCO Principles
• The role of regulators in overseeing CCPs
• The impact of Basel IV on CCP capital requirements
• The legal and regulatory challenges of cross-border clearing
• The future of CCP regulation

Module 9: Interconnectedness and Systemic Risk

• The interconnectedness of CCPs and clearing members
• The potential for a CCP failure to trigger a systemic crisis
• The importance of a robust recovery and resolution plan
• The role of regulators in managing systemic risk
• Modeling the interconnectedness of the financial system

Module 10: Capstone Project Part 1: Design

• Defining a specific CCP for analysis
• Mapping the data requirements and model architecture
• Outlining the key technical and analytical requirements
• Creating a detailed project plan
• Presenting the design to a mock review board

Module 11: Capstone Project Part 2: Development

• Implementing a model for margin calculation
• Using a stress test scenario to assess the impact on the default fund
• Analyzing the default waterfall's effectiveness
• Building a presentation to explain the analysis
• Documenting all assumptions and data sources

Module 12: Capstone Project Part 3: Presentation

• Presenting the full risk analysis of the chosen CCP
• Discussing the risks and benefits of transacting with it
• Proposing a plan for risk mitigation
• Q&A and peer feedback session
• Receiving expert recommendations and insights

Module 13: Non-Default Risks

• The operational risks of a CCP
• The legal and political risks
• The risk of a CCP's own credit standing
• The impact of a technology failure
• The importance of business continuity planning

Module 14: Emerging Trends

• The use of AI and machine learning in margining
• The role of tokenization and DLT in clearing
• The evolution of post-trade services
• The impact of new asset classes on CCPs
• The future of clearing and settlement

Module 15: Course Certification

• A final comprehensive assessment
• A final review of key concepts and objectives
• Issuance of a certificate of completion
• Post-course career guidance and networking
• A final Q&A with instructors

Training Approach

This course will be delivered by our skilled trainers who have vast knowledge and experience as expert professionals in the fields. The course is taught in English and through a mix of theory, practical activities, group discussion and case studies. Course manuals and additional training materials will be provided to the participants upon completion of the training.

Tailor-Made Course

This course can also be tailor-made to meet organization requirement. For further inquiries, please contact us on: Email: info@skillsforafrica.org, training@skillsforafrica.org  Tel: +254 702 249 449

Training Venue

The training will be held at our Skills for Africa Training Institute Training Centre. We also offer training for a group at requested location all over the world. The course fee covers the course tuition, training materials, two break refreshments, and buffet lunch.

Visa application, travel expenses, airport transfers, dinners, accommodation, insurance, and other personal expenses are catered by the participant

Certification

Participants will be issued with Skills for Africa Training Institute certificate upon completion of this course.

Airport Pickup and Accommodation

Airport pickup and accommodation is arranged upon request. For booking contact our Training Coordinator through Email: info@skillsforafrica.org, training@skillsforafrica.org  Tel: +254 702 249 449

Terms of Payment: Unless otherwise agreed between the two parties’ payment of the course fee should be done 10 working days before commencement of the training.