credit crisis and default swaps Volatility smile Basel III and IOSCO Monte Carlo simulation

our clients

The following is a short list of some of the institutions that are busy using our consulting, IFRS valuation or model building services and training expertise or have used our services in the past

Absa Capital; The JSE (South African Securities Exchange - Safex, the Interest Rate Division and Commodity Derivatives); Investec Bank; Standard Bank; Rand Merchant Bank; Network Healthcare Holdings (Netcare - JSE code NTC); Vrystaat Mielies/Maize; Riscura; Witwatersrand Consolidated Gold Resources (Witsgold - JSE code WGR), Venfin Limited, Mustek (JSE code MST), Masterclass Events, Greymatter Thinking, SeaCom, Peter Skerritt and Associates, Old Mutual plc (LSE code OML), True North Partners, CJS Securities, Adept Advisory.

The following institutions have used our in-house training services

Absa Capital; Standard Bank; Mercantile Bank; KPMG Auditors; South African National Treasury; The JSE (South African Securities Exchange), Africa Vukani, Rand Merchant Bank (RMB), JP Morgan.

 Recent Interesting Assignments

  • Credit and market risk overview for an international financial services institution.
  • Model validation and verification of the VaR and ETL vendor model implementation.
  • Hedging strategy for the USDollar Libor exposure of a client.
  • Assessing and verifying a client's waiver application for AIRB credit risk models - Internal Audit assignment.
  • Project manage IFRS 9 implementation for wholesale credit risk book.
  • Expert witness relating to the valuation and pricing of interest rate derivatives (swaps) for a South African bank
  • Model validation and verification services for a global bank with their trading hub in London
  • Submitting statements to the Securities Regulation Panel (SRP) and testifying as an expert witness in front of the panel due to a legal dispute emanating from a hostile take-over bid and the pricing of the employee stock options
  • Built up a relationship with Hymans-Robertson in London UK. Together we look at many interesting model risk and regulatory related problems for their clients. Hymans Robertson UK London
  • Part of a committee that is, together with Bloomberg, creating new tradable indices for BRICS countries (Brazil, Russia, India, China and South Africa)
  • Since the new Basel III capital requirements for bank's trade exposures to qualifying central counterparty (CCP) were published we built up experience in all calculations in measuring risk exposures and regulatory capital adequacy rules for banks' exposures to CCPs and counterparty credit risk (CCR). These includes all standards set by CPSS-IOSCO. We helped a client in getting compliant by estimating the size of the default/guaranty fund by introducing a novel optimization for the Current Exposure Method (CEM). The CEM is compulsory for CCPs. The end result is that the CCP can estimate the capital exposure for all clearing members and also their capital requirements as prescribed by the Basel III IOSCO regulations.
  • Quantifying the default fund for Safcom/JSE using the current exposure method (CEM), stress testing, value at risk (VAR), conditional VAR, expected/unexpected losses or tail risk or expected shortfall (ES) and expected tail loss (ETL) methods.
  • Implementing the current exposure method (CEM) in determining the hypothetical capital for a CCP as prescribed by CPSS-IOSCO and the Basel Committee on Banking Supervision.
  • Developing a spread based margining system for the daily margining of bond futures and bond index futures traded on exchange
  • Studying the shape of the volatility skews for options on single stock futures or single names
  • Developing models to calculate the initial margin requirements for exotic options traded on exchange. These include equity and FX barrier options, lookback options, Asian options, binaries, American digitals and a host more
  • Implementing functional form volatility models for the Safex ALSI (index) implied volatility surface; one being a quadratic model and the others the SABR model and the SVI model described by Jim Gatheral
  • Studying the shape of the currency/FX volatility surface in using this to price exotic options using local and stochastic volatility models
  • Studying the shape of volatility smiles for commodity options especially those for corn/maize, oil and gold where these models will be implemented on Safex soon
  • Implementing pricing models for exotic options utilizing local volatility models like binomial and trinomial trees as described by Dupire, Derman & Kani and Rubinstein
  • Valuation, risk measurement and re-engineering of Lehman Brother's derivative exposure to South Africa - Lehman defaulted in September 2008 during the credit crises
  • Valuation, risk measurement and re-engineering of Dealstream's derivative exposure through Safex - Dealstream was a South African brokerage that defaulted during the credit crises of Sep/Oct 2008
  • Developing a model to value Variance futures (swaps) traded on Safex (South African Futures Exchange)
  • Implementing the stochastic SABR (Heston like) implied volatility smile/skew model for the use of options traded on Safex
  • Calculating the initial margin requirements for currency futures and interest rate futures traded on the JSE
  • Valuation (and creation) of share based incentive schemes (employee option schemes EOS) and phantom share schemes, with their respective expense schedules, for listed companies in South Africa
  • Designing a structured derivative compensation package for advisors of a client
  • Valuation of and re-engineering of Black Economic Empowerment (BEE) schemes
  • Modeling and valuation of equity default swaps (EDS)
  • Developing trading and risk management systems for dealers in the treasury environment
  • Helping design and advising on new derivative structures - buy and sell side
  • Developing a risk management and bench marking system used by pension funds
  • In-house training course on programming with Excel VBA - visual basic for applications
  • Valuation of guaranteed funding agreements between companies

"But the creative principle resides in mathematics.
In a certain sense, therefore, I hold it true that
pure thought can grasp reality, as the ancients dreamed."
Albert Einstein (1879 - 1955)