The New York chapter held an event on 'Multiple Factor Risk Models' on October 27, 2010. Attilio Meucci presented a paper titled 'Factors on Demand'.

Attilio's paper and slides can be accessed on
Slides
Paper

Attilio's presentation was followed by a lively panel discussion moderated by Dan Rodriguez - Chief Risk Officer, Americas Equity Division & Global Arb Trading at Credit Suisse. The other panel attendees were:

- Dan diBartolomeo, President and Founder of Northfield Information Services, Inc
- Terry Marsh, President and CEO of Quantal
- Frank Nielsen, Executive Director and Head of Applied Research for the Americas at MSCI Barra
- Sebastian Ceria, PhD, CEO of Axioma

Melissa’s slides can be downloaded here:

Download file

The Professional Risk Manager (PRM™) designation program is the global standard for the world's top financial risk professionals. The PRM Candidate of the Year award program annually recognizes top PRM candidates from around the world. There are four awards given -- the prestigious PRM Candidate of the Year award, the other finalists for the top award, the Award of Merit for those whose exam scores across multiple exams distinguish them from the rest of the candidates, and the PRM Focus Award for candidates who have achieved the highest score of the year on the four individual exams of the PRM designation program.

“The entire award committee was very impressed by Mukul, and we congratulate him on this achievement,” says David Millar, PRMIA Chief Operating Officer. “He excelled on his exam results, written essay and interview, and proved that he is deserving of this prestigious award.”

Mukul Pareek says, “I am honored to have been chosen for this award. Preparing for the certification exams provided me with two invaluable benefits: firstly, a conceptual understanding of markets, risk, reward and regulation that any market professional needs in a dynamic business environment, and secondly, an understanding of the tools to immediately apply the theory, whether in the form of over a dozen detailed case studies, or spreadsheet based modeling for the kind of issues asset managers and risk professionals have to deal with each day.”

He adds, “If one is really interested in enhancing one's knowledge of the contemporary thinking on risk beyond the superficial, the PRM certification provides a very well structured route to do so. The self-contained course material is head and shoulders above anything else I could compare it to.”

For more information on the PRM and APRM, please visit our website

PRMIA would like to thank Sungard for their generous sponsorship and ongoing support of PRMIA.

Pictures from the Event:

Keynote Speaker David Rowe

Panelists Joseph Tanega (moderator), Joseph Langsam, Dean Christiansen, David Rowe, Marcus Cree

RISK MANAGEMENT IN AN ERA OF GLOBAL TURMOIL
September 22nd 2009, New York
http://www.prmia.org/events/view_events.php?eventID=3617

On September 22nd PRMIA's NY Chapter hosts an evening discussion "Risk Management in the Era of Global Turmoil." David Rowe, EVP for Risk Management at SunGard-Adaptive and a member of PRMIA Board of Directors will present his view of the lessons learned through the crisis. His presentation will be followed by Marcus Cree from the same organization discussing the role of social media in promoting best practices and establishing though leadership in the risk management profession.

In addition to David and Marcus, the event agenda features a panel of distinguished speakers including Dean Christiansen, Principal at Acacia Capital and Joseph Tanega of the University of Westminster, School of Law. Dean will share his first-hands experience in managing counterparty risk and collateral due diligence using real-life examples. Joseph's role will be to add an international perspective and moderate the discussion. This Sungard sponsored event will be concluded with a networking session.

PRMIA Risk Technology Trilogy Event Series
RISK ANALYTICS AND RISK PLATFORM CONVERGENCE
October 1 2009, New York
http://www.prmia.org/events/view_events.php?eventID=3453

Risk Managers are gathering on Oct 1st in New York to discuss traditional risk aggregation and performance measurement platforms, with particular focus on improvement required for the next generation Risk Management. Industry leaders will speak on the linkage of risk business processes with financial and performance measurement capabilities that are key to deriving risk exposure.

Interactive sessions are planned to discuss current trends in: data modeling, the convergence of front and middle offices, audit, real-time risk management and much more. This IBM and SAS sponsored event will be concluded with a networking session.

Katherine will be replacing James Tunkey as Regional Director of the New York Chapter. Katherine has been a member of PRMIA since 2003 and has been involved with the chapter as an active Steering Committee member for the past two years. In her role as Regional Director, Katherine will continue to cultivate relationships with senior risk professionals through C-Suite and CRO Summit events. Katherine sees opportunities to better leverage the thought leadership gleaned during these sessions, both through improvements in communication to the New York membership and also by integrating these themes into broader membership meetings.

In addition to adding value and promoting the PRMIA organization at a senior level, Katherine feels the New York chapter is at a unique juncture in being able to serve the ‘next generation of risk managers.’ She states this fits directly with our mandate, both in being able to promote PRM as the highest standard of risk certification as well as leveraging an energetic volunteer base. Adding value to a broader cross section of PRMIA’s member base through content, networks and mentoring should ideally lead to increased membership.

PRMIA would like to take this opportunity to thank James Tunkey for his invaluable contributions to the New York chapter and PRMIA. James was a member of the Regional Director Support and Standards Committee from 2003-2007, he was the Regional Director of the Hong Kong chapter from 2003-2004 and served the New York membership as Co-Regional Director from 2005-2006 and became sole Regional Director in 2006. PRMIA is delighted that James will continue to support the local chapter as a member of the New York Steering Committee.

PRMIA wishes Katherine much success in her new role and we look forward to seeing the continuance of excellent events held in New York in addition to new opportunities for the membership.

The forum will be a full-day conference at the Harmonie Club. It will feature renowned experts on credit risk and will focus on key developments and challenges in credit risk measurement and management, including the impacts of credit risk realization on other risks such as market risk and liquidity risk.

Hear about the latest research and trends in the credit risk space from leading practitioners with a look ahead to the most critical issues facing the global marketplace.

To register please visit the PRMIA events page or click http://www.prmia.org/events/view_events.php?eventID=2848

Highlights included:

•The Impact Hedge Funds and Alternative Industries Will Have on the Financial Markets
•Role of Risk Management within Hedge Funds
•Alpha and Beta of Emerging Hedge Fund Strategies
•John Dizard, Columnist, The Financial Times
•Hedge Fund Replication
•Hedge Fund Regulation: When, Not If

Overview
Risk management is being accepted as a strategic firm function, rather than simply as a necessary cost center at asset management firms, that include hedge funds, mutual fund, pension, and insurance firms. Risk management has also evolved into a collaborative approach between the risk management department and investment teams in the asset management industry, as compared to the previous policing function that began at commercial banks a number of years ago.

The Impact Hedge Funds and Alternative Industries Will Have on the Financial Markets (8:30am)
As hedge funds continue to consolidate and diversify strategies for driving alpha, more attention will need to be paid to the operational and managerial structure in order to simultaneously maintain a culture of entrepreneurship while also allocating resources for the due diligence necessary to keep the hedge fund structure abreast of regulatory requirements. At the root of the hedge fund management structure is the issue of “fairness” and competition – what is the best way to create a partnership structure that rewards expertise and loyalty while also taking into account the need to remain flexible, operationally, in a volatile marketplace and in light of management’s right to limit their own liability to any one firm? At the operational level, taxes are the heart of the hedge fund business model and, with increasing regulation pending on the federal level, and perhaps also internationally, it is necessary to stay vigilant in order to anticipate and respond to any outside claims.

The management of hedge fund strategy will take on new importance and significance as alpha becomes increasingly ambiguous in the drive toward expansion and the evolution of returns. Especially in emerging categories, alpha is beginning to originate in increasingly esoteric spaces, within previously unknown terrain and profit curves.

Role of Risk Management within Hedge Funds (9:30am)
The fundamentals of risk management include hard core communication amongst managers and the maintenance of a reservoir of cash. The key to successful implementation is the ability to get in or out of a position without moving the market against your firm. In light if this, risk managers are on the right track when they continuously evaluate their measurement and stress test strategies; ensuring they are using risk modeling and anomaly discovery as a tool for decision-making, but not as a vehicle for off-side forecasting.

Alpha and Beta of Emerging Hedge Fund Strategies (11:00am)
Value to hedge funds comes increasingly from beta and not alpha driven strategies. Therein lays the conundrum when evaluating correlation, exposure, premiums and returns according to the specificities of typically reliable measurement tools. The question of how to rethink valuation is the preeminent question when considering the future of hedge fund strategic management. Increasingly, it is not sufficient to retool some components of the strategic arsenal, while leaving others on hold, but it is necessary to rethink all of them in simultaneity. For managers, the implementation of this process of renewal is a challenge that has yet to be fully capitalized for an appropriate return.

John Dizard, Columnist, The Financial Times (12:15pm)
Of note on the international horizon, in special regard to the volatility in energy scarcity and currency crises, is the risk embodied by the European Union. It can be expected that this region will produce more downturns in the market than the usual suspects in the emerging market frontiers.

Hedge Fund Replication (2:00pm)
Traditional and alternative assets are increasingly reliant on exposure to beta factors as sources of risk return. Hedge funds are increasingly understood to use market-driven exposures to cull return, rather than seeking absolute value gains. Replication products seek to emulate this form of beta-exposure used by hedge funds by simulating the dynamics of the beta factors themselves. By employing liquid assets within a range of strategies meant to synchronize with and monitor hedge fund transactions and returns over time and in sight of specific targets, replication products can provide risk managers with some of the benefits of alternative asset volatility without the full exposure to down-side risk.

Hedge Fund Regulation: When, Not If (3:15pm)
The regulation of hedge funds within the US is an impending reality, but a reality that can be met on secure ground. While regulation of funds outside the US is more lenient in certain key aspects, comprehensively, the US remains a strong competitor and a key market. To augment the Congressional call for more stringent tax liability for hedge funds, the SEC has established an anti-fraud rule and increasingly stringent standards for investor accreditation. However, with due diligence on the risk management level, hedge funds with operations in the US should not expect any hiccups when the time comes to prove compliance. One area that requires attention is the field of reporting, as it will be the mastery of tax and other filings that will prove the rule for success. Included, since no intent to subvert law or defraud investors, or proof therein, is required for an SEC investigation of the same, it will be prudent for all hedge funds and associated partners to use their risk management strategies to fully embrace the upcoming comprehensive relationship by reviewing all internal documents and procedures and ensuring they will satisfy the inquiries of any new federal code or series of enforcements.

The Regional Director announced that Colin Telmer and Desiree ONiell have resigned as members of the New York Steering Committee but will be on hand as advisors on an as needed basis. The Regional Director thanked them for their time and contributions.

The NY chapter adopted their own By-laws and can be viewed by clicking here.

The Committee reviewed the events and activities that had been and were still to be carried out in 2007. They noted that the year has been very successful so far and their efforts enabled the hire of two positions within PRMIA Global, a Marketing and Event person. The Committee also started discussing their plans for 2008, including their calendar of chapter events, C-Suite events, all day events and the CRO Summit.

The Committee held an election of the Steering Committee as per the chapter By-Laws and the following people were elected as members of the New York Chapter Steering Committee: Mark Abbott, Viktoria Baklanova, William Ding, Philippa Girling, Matthieu Royer, Navin Sharma, Abraham Thomas, James Tunkey and Christopher Whalen.

James Tunkey was nominated as Regional Director and Navin Sharma was nominated as Deputy Regional Director.

The Committee also voted on the creation or maintenance of additional committees within the New York Chapter, which include a Market Risk, Operational Risk, Credit Risk, Social Programming and Scholarship Program and Advisory Committee.

To read the complete minutes of the meeting, please click here
.

February 28, 2007 - New York, NY - Highlighted with keynote presentations from industry leaders like John Hull, Ed Altman and Don van Deventer, PRMIA New York's 2007 "Frontiers in Credit Forum" raised issues of high importance for the risk profession. The general consensus among participating experts was a mixture of enthusiasm about the point to which the industry has evolved tempered with concerns about trends that, if not properly managed, portend trouble on the horizon.

Mr. Batterman reviewed highlights of Fitch's 2006 Global Credit Derivatives Survey, subtitled: "Indices Dominate Growth as Banks' Risk Position Shifts." The survey found that the notional amount of outstanding credit derivatives contracts sold rose from US$5.3 trillion at year-end 2004 to nearly US$12.0 trillion at year-end 2005 - an increase of 122%; by year-end 2006 this number had more than doubled to over $25 trillion. Indices and index-related products (CDX, iTraxx, ABX.HE) continue to drive the growth in the synthetic CDS market: the segment grew by an astounding 900% and, at US$3.7 trillion, now constitutes 31% of gross sold positions.

Of course, a key theme throughout the day was the strong appetite in the market for corporate leveraged loans, an asset class within one of the most innovative and fastest growing sectors of the U.S. capital markets in 20 years. Mr. Batterman noted how the growing secondary market for leveraged loans is driving the market in credit derivatives for these loans. Europe has taken the lead with LevX; dealers in the U.S. continue to work toward the introduction of the U.S. loan CDS index, LCDX.

Mr. Hamilton of Moody's pointed out that the prevalence of corporate leveraged loans prompted Moody’s to update its model for assessing the speculative grade default rate and introduce an LGD scale. The addition of corporate loan issuers to the bond universe, especially in the high-yield sector, will allow for a more representative indicator of corporate defaults.

Mr. Hamilton noted that the default rate on speculative grade instruments has been low - at or below 2% - for a "long" time. (He was referring to the period from mid-2005 to February 2007.) For 2007, he forecasts a default rate of 3.1%, still well below the historical average of 4.9%. Mr. Hamilton pointed out that the proportion of high-yield ratings categories (B2 to Caa) in Moody's portfolio has increased significantly. Like the morning's keynote speaker, Edward I. Altman, Mr. Hamilton projects a negative turn in the cycle by 2008 due to weak fundamentals.

Throughout the day, speakers discussed their views on the state of the market in high yield bonds, loans and distressed debt. Since 2003, there has been a steady climb in the issuance of speculative-grade bonds and loans. Corporate loans - in particular second lien loans - have become an important substitute asset class for highly leveraged issuers, and 2006 saw a pronounced rise in the number of loan-only issuers.

Compounding concerns is the expectation, based on historical data, that deterioration in the credit quality of loan-only issuers will coincide with deterioration in loan-only recovery rates. (Many panelists commented on the current abnormally low default/ high recovery rate state of the market versus the historical rate.) It was noted that the rise of loans as a substitute asset class, as well as the presence of new institutional investors with distinct strategic objectives and tactics, are wildcards for the direction of the expected default and recovery rates.

The dramatic increase in liquidity resulting from the presence of aggressive investors (e.g., hedge funds, private equity firms) in search of yield, however little, has given rise to an imbalance in supply and demand. And these aggressive investors, who lend directly to troubled issuers, can act as a lifeline or precipitate their default.

Matthieu Royer, Director in the Portfolio & Balance Sheet Management Group at CALYON (a division of Credit Agricole Group), moderated a panel on The Credit Model Spectrum. This group included Stephen Figlewski, Professor of Finance at New York University, who presented recent research and findings on the macro-economic aspects of default likelihood and migration forecasts; Bjorn Flesaker of Bloomberg who spoke about the use of CDS to replicate or price other default contingent claims; and Sivan Mahadevan of Morgan Stanley who provided a market perspective on default correlation.

In the afternoon Practitioners Forum, Martin Fridson, CEO of FridsonVision, LLC, spoke abut the benefits, and costs, of liquidity. He referred to a "credit spiral" that lets companies borrow their way out of trouble. Indeed, fewer troubled companies are filing for Chapter 11 because hedge funds are eager to step in with financing in the current market environment. Mr. Fridson spoke of the power of liquidity to keep the default rate low (at least temporarily). And he raised concern about the quality of new issuances that he speculated could lead to a peak in the default rate in 2009. This idea was broached by an earlier presenter who indicated that the rating distribution of first-time issuers since 2004 leads many to think the default rate is primed for a rise: 30% of issuers are rated "Caa" out of the gate.

Curt Deane, principal of the Deane Group, pointed out that there is no apparent reward for the level of risk in this market, and questions how the liquidity can justify the homes it is seeking. Mr. Deane worries that you don't know who the ultimate counterparty is. He wonders why nobody kicks tires anymore and asks: are we too complacent about the concept of credit protection?

Chris Whalen, Managing Director of Institutional Risk Analysis, reiterated many of Mr. Deane's concerns. He asserts that we need a more critical view and must look at deeper default experience. He'd like answers to questions such as "When do you normalize a data series?" and "How does a company compare to its peers?" He, too, notes that there is no compensation for risk today, and that a hedge fund manager has zero incentive to enter into a restructuring driven by a bank workout department; the incentive is to liquidate.

The size of the distressed debt market and performance are what continue to drive investment in this asset class. Assets under management at distressed debt hedge funds range from $5 billion to $20 billion. In 2006, BB-rated bonds yielded 10%; CCCs yielded 20%; distressed CCCs yielded 40%; and the average return on defaulted bonds was 40% to 60%. Although more and more players see assets in bankruptcy as an exciting asset class, the big unknown is whether these investors will be capable of withstanding defaults and write-offs during a downturn.

Indeed Edward Altman, Max L. Heine Professor of Finance at New York University's Stern School of Business, sounded a note of caution for risk professionals. At 2.5% in 2007 and 3.7% in 2008, his default rate forecast for corporate high-yield non-investment grade bonds is higher than the current rate of 0.76%, but well below the historical average of 4.2%. While Professor Altman is not necessarily forecasting a drying up of liquidity, he does caution that corporate fundamentals and poor new bond and loan quality point toward significantly higher default rates in the future.

The issue for Professor Altman is: are historical default/recovery models still relevant or is there a new paradigm? He questions the conventional wisdom that recession paves the way for defaults. As he points out, this was not the case in the last two recessions. In his view, new models are needed.

Today's average loan in default sells at $0.93 on the dollar, an amount very close to that of the average on new defaults. Ed Altman wonders if these companies are really worth that much in asset value? And he poses this important question: will excess liquidity continue to dominate the market or will we observe a regression to the long-term mean and where defaults and recoveries are once again based on firm-fundamental and more traditional supply/demand risk patterns?

Sound familiar?

If PRMIA's 2007 Frontiers in Credit Forum is used to gauge quality for future programs, members will want to make a point of reserving a slot for upcoming events. Matthieu Royer summed it up by saying that he had never seen such a high caliber of panelists in a one-day event. This forum is just one example of PRMIA's level of commitment to delivering high-value programs to its membership.