Collateral management - Deep dive

Whoever has watched "The Wolf of Wall Street" has likely struggled to understand the jobs, products, jargon that surround financial markets. Some of us are still trying to get our way out of this financial jungle and clarify the associated strategies. Let's demystify these!

In close collaboration with PwC's subject matter experts, PwC's Academy has developed a comprehensive, multi-layered training curriculum for junior and more experienced financial industries’ employees and managers alike, who seek to gain a solid knowledge of derivative instruments.

With this second module, participants will further dive into the realm of collateral management by exploring the mechanism behind this activity such as type of collateral, margin call and other relevant features. In a second step, the focus will be on the operational lifecycle and the relevant key documentation.

By the end of this training, participants will be able to:

• understand the fundamental characteristics of collaterals;
• determine the types of collateral required for various scenarios;
• gain a detailed understanding of collateral operations and their lifecycle;
• understand the associated risks and protection framework.

• 1. Refresher on collateral management foundation module:
  • Definition, purpose and key functions of collateral management
  • Role of collateral in reducing counterparty risk and enhancing liquidity
  • Types of collateral: cash vs non cash, acceptable vs un acceptable collateral, collateral acceptability and haircuts
  • Comparison collateral and margin: margin in derivatives contract vs collateral in financing agreements
  • Initial margin and variation margin
• 2. Collateral management lifecycle
  • Process of posting collateral in response of margin calls or credit agreements
  • Role of clearinghouses, CCPs and bilateral arrangements
  • Monitoring collateral value to ensure adequacy and minimize risk
  • Frequency and triggers for margin calls
  • Substitution of collateral during a transaction's lifecycle
• 3. Collateral management documentation
  • Key documentation: ISDA CSA, GMRA and GMRA annexes
  • Enforceability, dispute resolution and triggers

This training is coordinated by Laurent Dubois, Director and Solimane Bsiss, Senior Manager at PwC Luxembourg.

Laurent is active in our Assurance practice in managing and delivering a diverse range of assurance engagements toward Alternative and Banking actors to local and international clients and PwC offices.

He has exposure to a wide range of valuation methodologies, a practical understanding of the effective strategies delpoyed by its clients in the context of financial reporting.

Laurent is Réviseur d’entreprises agréé (REA).

Solimane is senior manager within our Valuations Services (VS) practice and leads a high-performance quantitative team specialising in the valuation of derivatives and structured products as well as private debt.

Solimane joined PwC in 2008 and has gained extensive knowledge and experience in the field of valuation of financial assets. He has extensive experience working on various valuation models such as discounted cash flow models, credit spread models, black models, Monte Carlo simulation, among others.