Page 20 - MONECO Financial Training Catalogue

PRACTICAL REGULATORY RISK CALCULATIONS FOR EU FUNDS

Case Study: Multi-Strategy UCITS VaR Calculation − • Sensitivity analysis: key risk factors (equity beta, interest
Alternative UCITS using derivatives for leverage and hedging, rate duration, credit spread)
€300M AUM. Portfolio Composition: • Rolling 52-week risk metrics: identify regime changes
• 70% long equity positions
• 30% equity index futures (synthetic exposure) Group Discussion:
• Currency hedges (EUR/USD, EUR/GBP) • How do you set appropriate risk limits for different fund
• Interest rate swaps strategies?
• Overall net exposure: 140% of NAV • When do quantitative metrics fail (e.g., correlation
breakdown in crisis)?
Analysis Tasks: • Board-level risk reporting: what metrics matter most?
• Calculate VaR using all three methods (Historical,
Parametric, Monte Carlo) 12 −13 30
30
• Scale from 1-day to 20-day holding period Lunch break
• Determine appropriate reference portfolio 13 −17 30
30
• Calculate Relative VaR (fund vs. benchmark) Leverage & Liquidity Management
• Calculate Absolute VaR (% of NAV) AIFMD Leverage Calculations:
• Assess compliance with UCITS limits • Gross method: sum of absolute values of all positions
• Perform Kupiec backtest on 250 days of returns
• Identify VaR breaches and regulatory implications • Commitment method: netting, hedging, and cash borrowing
adjustments
Group Discussion: • Leverage limits and notification thresholds
• Which VaR method is most appropriate for different fund • Temporary borrowing exclusions
types? • Regulatory reporting obligations
• How do funds manage VaR limit breaches?
• Procyclicality concerns: VaR increases during stress when Liquidity Risk Management:
you want to increase risk • UCITS liquidity rules and asset eligibility
• AIFMD liquidity stress testing requirements
Advanced Risk Metrics & Stress Testing • Redemption stress scenarios (10%, 30% shocks)
Risk Beyond VaR Figures • Time-to-liquidation bucketing
• Conditional VaR (CVaR/Expected Shortfall): expected loss • Liquidity ratio calculations
beyond VaR • Anti-dilution mechanisms: swing pricing, dilution levies,
• Maximum Drawdown: peak-to-trough decline gates
measurement
• Stress testing requirements (UCITS/AIFMD) Case Study: Leverage & Liquidity Crisis Management − Multi-
• Historical scenario analysis (2008 GFC, 2020 COVID, 2022 asset UCITS facing redemption pressure during market stress.
inflation shock) Scenario:
• Hypothetical scenario construction • Fund size: € 500M
• Risk-adjusted performance: Sharpe, Information, Sortino, • Sudden redemption requests: €75M (15% of NAV) in one
Calmar ratios
Case Study: Comprehensive Risk Dashboard - Hedge fund day
replication UCITS with complex strategy, requires detailed • Market conditions: equity markets down 5%, credit spreads
risk reporting. Portfolio Characteristics: widening, low liquidity
• Long/short equity positions • Portfolio includes some illiquid positions (small-cap stocks,
• Volatility arbitrage using options corporate bonds)
• Credit strategies using CDS
• Moderate leverage (160% gross, 40% net) Analysis Tasks:
• Calculate leverage using both gross and commitment
Analysis Tasks: methods
• Calculate comprehensive risk metric suite: • Assess current leverage against regulatory limits
− VaR (99%, 20-day) and CVaR • Evaluate portfolio liquidity by time-to-liquidation buckets
− Maximum Drawdown (historical and stressed) • Model impact of €75M redemption:
− Sharpe Ratio (vs. risk-free rate) − Which assets must be sold?
− Information Ratio (vs. HFRX Global Hedge Fund Index) − Market impact costs
− Sortino Ratio (downside deviation) − Potential breach of diversification rules
• Stress test portfolio through: − Remaining liquidity profile
− Historical scenarios: March 2020 (COVID), Q4 2018 (vol • Determine if swing pricing should be applied
spike) • Calculate appropriate swing factor
− Hypothetical scenarios: 30% equity drop, 200bp rate • Assess whether redemption gate/suspension needed
rise
20 Hybrid course – both classroom and online training available.