Activity :

• A leading investment bank sought our services to review and assess the validity of a counterparty credit risk model developed in-house. The model's purpose was to estimate the capital requirements of an SPE that was established with an "AAA" rating for derivatives trading. Transactions that were modeled included interest rate and currency swaps, caps, floors and swaptions. The model's output was used to help assess the minimum capital requirements for the new trading vehicle.

Results :

• Advised in negotiations with the rating agencies and the testing of the model and the procedures for collateralization from the sponsoring company. The work included a review of the risk model's output and its implementation.