Active Portfolio Management

2 Day Workshop
(Workshop is not being offered at this time)

Introduction

Over the last 20 years, the drivers of the credit risk analysis have broadened beyond a simple understanding of the risk of lending to, or buying of, a single asset or single borrower to an awareness of how the risks of such assets and borrowers risks react with to each other when combined in a portfolio.  This knowledge has led to an advance in the calculation of return on risk to include methodologies designed to optimise the risk and return ‘trade-off’ via diversification, of Portfolio assets.

Thus a vision of balanced yet quality growth of risk assets; i.e., garnering earnings commensurate with our risks, has become a vital tool in insuring the viability of financial institutions.  It not only helps them weather the storms of volatility that exist in risk markets, but it actually contributes to their stability, their asset quality and their earnings.

This course is designed to introduce lenders and risk takers to the principles of Active Credit Portfolio Management (ACPM) and to give them n insight how such a structure can benefit their organization.

Objectives

On completion of this seminar, delegates will understand:

• The how and why of risk and reward correlation
• The Efficient Frontier framework and why it matters
• How to integrate risk appetite into the portfolio calculation
• How to determine the best portfolio model for their institution
• How the ‘Diversification Paradox’ can be used to their advantage.
• The ‘pitfalls’ of ACPM
• A common sense approach to building a risk/reward framework

Who should attend this seminar?

This course is useful is useful for anyone who wishes to acquire a good introduction to the process of Active Credit Portfolio Management.  Thus it is appropriate for risk professionals in commercial, corporate and investment banking, as well as senior management interested in a solid overview of the subject.  The seminar is practical, current and relevant.

Content

Day 1

1. Setting the scene

• A Brief History of ACPM from Markowitz to the present

2. Testing the concept

• Case study – A practical test of the theory using a two-asset model.

3. Building a Portfolio Management function

• The basic models
• ‘Slice & Dice’
• ‘Passive’ – Controlling the front-end
• ‘Active’-Controlling the front, middle and exit
• Where to start?
• Building the protocols
• Potential pit-falls

Day 2

4.  Achieving competitive advantage

• Establishing/Maintaining a dynamic approach to Risk Appetite
• Underwriting v. Holding Assets
• Properly pricing risk
• Early-Warning & Stress Testing
• Preparing for Basel III