Case study 1: Implementation of IFRS9 model
- Extensive data cleaning and analysis of the segmentation of the Retail portfolio
- Review of the internal rating methodology
- Modelling of the staging rules and definition of the significant increase of credit risk
- Analysis of the compliance of modelling choices with respect to international IFRS9 requirements and to local IFRS9 guidelines (of Tunisian Central Bank)
- Calibration of ECL parameters (Exposure At Default, Probability of default) with relevant market data and client portfolio data
- Global modelling and calculation of ECL, and assessment of the consistency of the results by segment, stage and rating.
Case study 2: FRTB-IMA implementation for a large UK bank
Mazars partnered with a large UK bank to deliver the design and implementation of their market risk internal models (IMA) in line with FRTB (involving over 10 quant consultants). All aspect of FRTB has been covered such as modelling expected shortfall and stressed expected shortfall for modellable and non-modellable risk factors (NMRF), backtesting, determination of Stressed Period. The key points of the work were:
- Discussion of the regulatory texts and formulas as well as market data design and prototyping
- Definition of proxying methodologies
- Design and implementation stress period selection (including NMRF)
- Implementation of PLATS and other relevant statistical tests
- Design and implementation of expected shortfall and stressed expected shortfall models
- Writing model documentation and validate it through a deep analysis of the consistency of the results
- Multiple interactions with various stakeholders in the Risk department.
Case study 3: Liquidity model design for UCITS equity fund for FCA
Mazars acts as liquidity expert for the FCA in the context of an investigation of a suspended equity UCITS fund. Mazars has developed a comprehensive and flexible liquidity solution in Python that helps the client to proactively manage liquidity risks, meet regulatory requirements (such as COLL rules and IOSCO recommendations), and align with industry best practices. The solution:
- Leverages automated data feeds to seamlessly retrieve funds' composition and securities volume data
- Generates liquidity metrics and stressed liquidity metrics
- Benchmarks fund's liquidity metrics against a carefully curated universe of comparable funds leveraging on funds publishing their monthly composition in EIKON
- Summarises in a dashboard KPI, Unstressed Liquidity Metrics, Stressed Liquidity Metrics, and benchmarking against peer funds.
Case study 4: Valuation of convertible loan notes for clients
The project involved developing a convertible bond pricer model in Python using the Cox-Rubinstein-Ross stock tree methodology. This model serves as the foundation for valuing convertible bonds. Building upon this, the goal is to extend the pricer's capabilities by integrating extra functionalities:
- Inclusion of an optional exercise barrier. This feature introduces a threshold that must be reached for the conversion to take place, adding complexity and customisation to the model
- Implementing interpolation techniques for the term structure of interest rates. This refinement allows for a more accurate representation of interest rate dynamics over time
- Built a handy API for client to enhance user experience on pricing convertible bond that helped to visualise prices based on different model inputs and get report for audit purposes
- Results benchmark of the application and model validation by comparing valuations to those obtained using industry-grade valuation software such as Numerix.
Case study 5: Development of a climate risk solution
- Review of different climate risk assessment methodologies
- Establish a comprehensive framework for climate risk analysis
- Gather financial portfolio data from clients and sectoral data from external sources
- Collection of regulated climate scenarios projections data for macroeconomic and climate variables (transition and physical risk)
- Calibration of the volatility to climate risks using expert judgement
- Global modelling and calculation of CR and ECL
- Implementation of the model in an API cloud-based tool for visualising metrics by corporate, segment, location and scenario.
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