Collateral Management Simulation

In the simulation, participants will:

• Analyze trade portfolios and calculate daily exposure using industry methods.

• Process and respond to margin calls from multiple counterparties.

• Strategically select and allocate collateral assets from a limited pool to meet calls.

• Navigate and apply the specific terms of different CSAs.

• Manage liquidity by deciding when to transform assets or access funding.

• Respond to real-time economic events that trigger rating changes or volatility spikes.

• Negotiate with "counterparty" teams to resolve collateral disputes.

• Report on collateral positions, usage, and potential risks to the "management."

• Explain the role of collateral management in mitigating systemic and counterparty risk.

• Execute the step-by-step workflow for processing and settling margin calls.

• Apply haircuts and make optimal collateral allocation decisions under constraints.

• Articulate the impact of key regulations (UMR, Basel III) on collateral practices.

• Analyze how market events directly affect collateral demand and liquidity needs.

• Develop strategies for efficient collateral and liquidity management.

• Communicate collateral positions and disputes effectively with counterparties and internal stakeholders.

• Build confidence in making critical operational decisions under time pressure.

1. Receive the Brief Teams receive their firm's trading book, CSA terms with key counterparties, and available collateral inventory.

** 2. Analyze Exposure and Calls** Each round, teams calculate net exposure, receive margin calls, and assess their available HQLA.

3. Make Strategic Decisions Participants decide which assets to pledge to which counterparty, manage cash, and potentially negotiate calls.

4. Collaborate and Negotiate Teams may need to internally prioritize calls or engage with other teams acting as counterparties to resolve disputes.

5. Navigate Shocks Mid-simulation injections, like a broad market sell-off or a counterparty downgrade, force strategic pivots.

6. Review and Reflect End-of-round dashboards show performance metrics (cost of collateral, dispute rate, liquidity buffer), leading to strategy refinement for the next round.

• Who is the collateral management simulation designed for? This simulation is ideal for students and professionals pursuing careers in risk management, operations, treasury, middle office functions, and anyone needing to understand the post-trade ecosystem in derivatives markets.

• Do participants need prior derivatives or operations experience? No prior experience is necessary. The simulation includes introductory content on derivatives and collateral, making it suitable for advanced undergraduates, MBA students, and professionals new to the field.

• How long does the collateral management simulation run? The core simulation experience is designed for 2 to 3 hours, but it can be extended with deeper preparatory modules or more complex negotiation rounds.

• Is this an individual or team-based simulation? It is primarily designed as a team-based simulation to foster collaboration and negotiation, reflecting real-world desk dynamics. It can also be configured for individual participation.

• What real-world tools or frameworks are used? Participants engage with concepts from ISDA documentation (like the CSA), regulatory rules, and standard industry practices for exposure calculation and haircuts.

• Can the simulation focus be customized for our program? Absolutely. Emphasis can be placed on specific areas such as regulatory compliance, liquidity risk, or operational efficiency, depending on your learning goals.

• How is performance measured in the simulation? Performance is multi-faceted, measured by metrics like cost efficiency of collateral posted, speed and accuracy of call processing, liquidity buffer maintained, and effectiveness in dispute resolution.

• What roles does this simulation prepare participants for? It provides foundational knowledge for roles such as Collateral Management Analyst, Margin Operations Specialist, Counterparty Risk Analyst, and Treasury Liquidity Manager.

• Speed and accuracy in processing margin calls.

• Minimizing the cost of collateral and preserving liquidity.

• Adherence to CSA terms and effective mitigation of exposure.

• Quality of collateral optimization and response to market shocks.

• Clarity in internal reporting and effectiveness in resolving disputes with counterparties.