Future Trends in Optimisation Whitepaper

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Future Trends in Optimisation: Collateral, Regulatory Capital and CCP Selection

Financial firms are currently experiencing significant regulatory and cost pressures due to Basel III, Dodd Frank, and EMIR.

This is leading to a search for ways to optimize various aspects of trade types that involve some level of counterparty credit risk (derivatives, securities lending, repo).

This whitepaper looks at how financial firms can optimize trading decisions based on:

•  Regulatory Capital Optimization: What is the cost of capital per unit of P&L? (RWA, CVA, Balance Sheet Usage)

•  Collateral Optimization: What are the Funding Costs?

•  Counterparty Optimization: Is it more profitable to trade bilaterally or via a CCP? If via a CCP then which CCP is optimum?

•  Trade Type Optimization: Can the firm generate more P&L by deploying an asset in a securities loan, repo, or to collateralize a derivative?

The paper discusses how to calculate the different optimization types and how they are interrelated.

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