Supporting clients through regulatory approval and review

Engagement Goal:

European Central Bank (ECB) Targeted Review of Internal Models (TRIM) audit preparation: Model validation for Counterparty Credit Models used for Capital under the Basel III Internal Model Method.

Project Description:

Quaternion Quant Services was retained by one of the first banks to undergo the ECB’s TRIM audit to provide comprehensive benchmarking, validation gap analysis, bottom-up review and updates to model documentation. The scope covered the Internal Model Method (IMM) models used for counterparty credit risk and included all asset classes. The result for our client was a successful completion of the TRIM audit.

Engagement Goal:

Model Validation of Standardized Initial Margin Model (SIMM) for Federal Reserve and PRA submissions.

Project Description:

Quaternion Quant Services was retained to provide independent quantitative model validation and benchmarking to support a model approval submission for the SIMM model for both Federal Reserve and PRA submission. The work was documented to SR 11-7 standard and the ultimate regulatory submission was successful.

Engagement Goal:

Renewal and re-approval of Counterparty Credit Models to be used for regulatory capital under the Basel III Internal Model Method and to be used in multiple regulatory regimes.

Project Description:

Quaternion Quant Services was engaged as the lead consulting firm in a long term program to renew and seek approval for a modern, post-crisis suite of CCR IMM models, cross asset class. The resulting models were submitted and gained regulatory approval in multiple EU and non-EU regulatory regimes. The overall program of work involved research, development (including prototyping), documentation and submission assistance for a comprehensive suite of models. The work was done to the SR 11-7 standard mandated by the Federal Reserve bank. The ultimate regulatory submissions have been successful in multiple regulatory regimes.

Engagement Goal:

Development of a methodology and implementation of algorithms supplementing the existing internal Value-at-Risk (VaR) engine that would provide estimates to the Risks Not In the Model Engine (RNIMEs) of the clients VaR model.

Project Description:

In the context of a TRIM audit, the internal VaR model of the client had received numerous findings with respect to the Risks Not In the Model Engine (RNIME). During the engagement, the Quaternion Quant Services team developed a quantification methodology for all RNIMEs that had been identified and implemented quantification algorithms to estimate the impact on the overall VaR of these risks. A total of 70 identified RNIMEs risks were quantified. Affected asset classes were interest rates, commodity, equities, FX and credit.