Margin and Collateral Optimization

  • Intermediate
  • 7 CPE Credits
  • Group-Live
  • Prerequisite: none
  • US $995
  • Group discounts available


Michael J. Barrett    Read bio

cOURSE objectives

Optimizing margin and collateral is not just desirable, but essential today given the regulatory demands for highest  quality, liquid assets to be used for meeting margin requirements, segregation requirements,  and Basel III funding and liquidity rules.  The roadmap to achieving true collateral optimization is complex, but is achievable through many available options.  In this course, we will identify the key building blocks and processes necessary to manage and allocate collateral assets efficiently, maintain funding capacity, and unlock the value of collateral used to manage counterparty risk and meet regulatory demands. 

  • Hours:  9:00 am-5:00 pm (registration/breakfast starts at 8:30 am)
  • Advance preparation: none


  • Defining margin and collateral optimization, and defining the desired outcome
    • There are no “one-size fits all” solutions
  • Building the margin and collateral rulebook – the first essential building block
    • Converting the margin and collateral rules embedded in counterparty agreements and documentation into on demand, usable data
    • Achieving the complete rules by counterparty and aggregating counterparties for collateralizing exposure
    • Bringing in the CCP margin models and collateral eligibility requirements
    • Understanding both the firms needs and the needs of the business lines in the rulebook
    • You cannot play the optimization game without an intimate understanding of the rules, external and internal
  • Managing the collateral supply chain – understanding the inventory and the sources of inventory
    • Re-use and re-hypothecation
    • Building collateral pools based upon asset classes
    • Costing the collateral assets
    • Cross-margining
    • Allocating cost of collateral
    • Simulations and collateral projections, deploying the rulebook to project inventory needs and the “what-if” analyses that need to be done
  • Aligning the internal interests and governance
    • Capital and leverage, liquidity and the need to optimize processes across the enterprise before you can optimize collateral
    • Best practices for optimizing the liquidity, margin and collateral functions and processes
    • Managing front-to-back, across silos and pools
    • Managing the conflicts – the changing Treasury function and collateral needs of the business lines
  • IT investments and paybacks
    • Simplifying the internal IT infrastructure, platform selection and decommissioning
    • The vendor systems and their optimization engines, current state and future state
    • Size matters in the build, buy or outsource decision process
    • Making the decisions on where and how to invest in technology to gain the greatest payback; how to get thereIT decisions will influence the optimization outcome and being forced to remediate must be avoided:  how to construct the IT roadmap to meet strategic optimization imperatives
  • Margin and collateral optimization strategies
    • Determining the value of collateral – static valuation, continuous revaluation
    • The role of the repo desk and securities lending desk in collateral valuation
    • Internal transfer pricing
    • How sophisticated do you want to get, and understanding all of the cost elements in highly sophisticated collateral optimization algorithms
    • Exploring the tri-party agents offerings for optimization and the limitations:  Clearstream, Euroclear, BNY Mellon and JPMorganChase
    • Sell side optimization offerings coming into the marketCollateral as a revenue center
    • CVA, DVA, FVA and the XVAs – how they function and how they impact collateral optimization
    • Accounting for securities processing costs and limitations, and the impact on the collateral optimization model
  • Collateral optimization models
    • Basic including “cheapest to deliver” and waterfall models
    • Intermediate with center-of-excellence operations and collateral trading
    • Advanced algorithmic optimization
    • Auto-allocation and substitution models
  • Implementation
    • Staging implementation in an evolving regulatory environment
    • Maintaining a forward strategy during economic uncertainty
    • Building flexibility and optionality into process optimization
    • The importance of STP and getting as close to real-time capability as possible
  • Emerging trends in margin and collateral optimization
  • Case studies

In-house instruction is available.  Contact us to inquire.

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