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Transcript of Traded Products
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Deutsche Bank - Paragon Induction Pack
Risk ManagementTraded Products
Document Owned By DB Functional Team
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Introduction
Primary Navigational Flow of the functionality
Key terms
Details of UI screens Purpose of the screen and important workflows
Purpose of the document
To provide a high level understanding of the functionality and featuresavailable in the Paragon Traded Products Module
Intended Audience
DB Account TCS Team
New Inductees in the DB Account
Contents
Individual should have read the Paragon Initial Induction Document
Prerequisites
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The Traded Products module deals with all the products in which DB is doing businessvia Margin and Derivatives trading activities. In DBs term these are covered under the
Global Markets area
Products under Traded Product include
FX (Spot and Forward) , Futures and Option
Swaps, Bonds, Equities, Options, Repo, Metals, Commodities
Money Market Derivatives, Money Market Cash Instruments (Call / Term Deals), etc.
Limits can be defined and exposures can be monitored at a portfolio level for variousderivatives and products for DB customers.
Credit Facility is created as per the legal agreement signed between the customer andbank for the specific trading clauses
Netting Agreements can be captured which are used to net exposures acrosscounterpartys branches that are participating in the agreement.
To enable effective utilization of Limits, Clustered Portfolios are being supported. Thishelps to assign a single umbrella limit to cover transactions on different products andacross different legal agreements / counterparties.
Traded Products in Paragon
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Traded Products in Paragon
Features supported are:
Maintenance of Facility (ISDA, OSLA, Undoc, etc.), participating branches (external andinternal) and netting agreements.
Capture Null, Not Null and Grey Limits
Capture Tenor Wise Limits and monitoring Exposures for Portfolios (Single andClustered)
Clustered Portfolios
Monitor Current Credit Exposure [CCE] provided via Risk Engines
Monitor Potential Future Exposure [PFE] provided via Risk Engines
Capture of Probability of Default (PD) and Loss Given Default (LGD) details atPortfolio/Limit level
Maintaining of Approved Limits (Live) and Pending Approval (Pending) Limits. Display of Trade Details
Note
Grey Limits are set up to manage exposure to certain extra-ordinary deals, which wouldotherwise breach the actual limit in terms of tenor. Grey Limits are set for tenor beyondthe maximum tenor.
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Key Terms
Facility
Traded Product facility is derived from the legal agreement between DB and the external
customers and is as per the agreed standard trading clauses (ISDA , REPO etc)Limits are not captured at facility level .Business Area is added to a facility which formasa Portfolio .Limit is assigned to this portfolio
Participating Branches and Netting sets are captured at facility level
Participating Branches
Set of branches for both the external and internal counterparties which can participate in
the trading under one facility. It is captured at facility level.Participating ProductsFor each facility type (i.e. legal agreement type) there is a fixed set of products for whichtrading activities can be performed .While setting participating branches all or some ofsuch products can be selected based on what is mentioned in the legal agreement
Business Area
In real market trading activities happens on many products. From credit risk
management perspective these products have been classified in multiple groups andeach of these groups is known as Business Area . Credit Officers monitor the limit atBusiness area level
Portfolio
A facility can be created for trading in multiple business areas. Limit can be assigneduniquely for one business area .Combination of facility and a business area is known asPortfolio .In traded product module limit is assigned to a portfolio
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Key Terms
Netting Set
At Legal agreement level it is agreed that for certain participating branches and productsexposure netting can be done .That is the amount overdue on DB or customer and vice
versa can be adjusted .Sets of such branches and products is known as Netting set .Thisis primarily done for correct exposure calculation (credit netting) and for satisfyingregulatory economic capital requirements (regulatory netting)
Limit
Maximum amount that borrower can borrow under a facility is called Limit. It is assignedto a single tile or a clustered portfolio.
Availability
The difference between a limit and the aggregate of current borrowings outstanding .
Utilization (Exposure)
This is the amount which has been utilized by the borrower out of the limit granted.
Example
TCS has been granted a Limit of 100 and out of that 60 has been utilized so availabilitywould be 40 (Limit Utilization)
Limit = 100
Utilization = 60
Availability = 40
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Traded Products module is accessed through the Paragon Main Page by clicking on theTP node
The navigation to various screens in the TP module can be done via the menu options. Furthernavigation can also be done from individual screens
Traded Products Module
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Counterparty List isused for searching thecustomer record basedon the availableparameters .
User fills in the searchtype and then pressesGo button, list ofcounterparties isdisplayed based on thesearch type
The Product Group overviewScreen can be opened from here.For this user mark the desiredcounterparty , right click andselect PGO.
Counterparty List
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Primary Navigation
Traded Products( View List)
Portfolio List
Create Clustered Portfolio
Modify Single Tiled Portfo
View Portfolio
Create Limit
View Limit
Set PFE multiplier
View Trade Details
CSA ID Details
Portfolio Ratings
Business Owner
Netting Set List
Modify
Authorize
Delete
CSA Id search
Facility List
Participating Branches
Annotation History
Legal Status
CSA IdModify Facility
Delete Facility
View Facility
CSA Details
Add Business Area
Portfolio List
Netting Set List
Counter Party List
Delete Zero Limits
Product Group Overview
View Facility Overview
Create Facility
Create Masters Master
View Masters Master List
Business Area Overview
Portfolio List
Create Clustered Portfolio
Master Masters Business AreaPortfolio ListFacility
Modify/ Del/View
Create Netting
View Netting List
Create Add/ View/Delete
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Product Group Overview
Participating Branches & Netting Set
Portfolio
Facility
Miscellaneous
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Create FacilityWhen the legal agreement between DB and the external customers is through, trader
requests the credit officers to sanction the credit limits so that the transactions can beinitiated .Details like Product , Requested Limit amount are provided by the trader
For Margin products credit officers have to make sure that a legal contract is in place beforeapproving a limit . Based on the contract a facility is created and participating branches andnetting sets are defined
Appropriate business area is added to a facility which create a portfolio. Limit is assigned tothis portfolio
Facility is created by using the Traded Product PGO screen
Facility becomes active only when the credit application approval is done for the customer
hierarchy
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To create the facility the compulsory fields marked in yellow has to selected from theQBEs and saved.
Create Facility
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Facility - Status Workflow
On Hold
Pending AuthSend Back Reject
Active
Pending Mod. Auth
Pending Closure
Deleted
Create
Authorise via Credit Application
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Facility List
Facility List is used for searching the facility record based on the available parameters .User fills in the search type and then presses Go button, list of facilities is displayedbased on the search type
Facility List further provides navigation to Facility Details screen which is used for facility
data maintenance (modification, deletion etc)
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Facility Details Key Elements
This panel provide thecustomer details, facility id,type & status .DB Entityindicates the DB internalsubsidiary which willfacilitate transactions.
This panelprovides the list ofproducts which areavailable under aparticular facilitytype.
This panel providethe netting set id ,status and thedescription
This panel providethe internalcounterparty whichparticipate in thefacility
This panel providethe Externalcounterparty whichparticipate in thefacility
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Modify Facility
In order to maximize profits and minimize risks , it is regularly required to update theearlier approved limits .Based on the business scenario , limits may be increased ,
decreased or completely eradicated for the customersAll such updates are done via Facility Details screen and are approved after credit
application is released
Covered under PGO
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Screens for Other Attributes
Annotation/ HistoryIt is possible that while creating or
modifying a facility , user may like toenter some comments for futurereference .This screen is used for thatpurpose . Annotation history contains thelist of past comments entered in Paragon
Legal StatusThis screen provides the details of legalstatus of the facility
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Add Business Area
A Business Area identifies a product/product group or trading desk within GlobalMarkets that can trade under the legal agreement (facility).
Once a business area is attached to a facility an active null single tile portfolio iscreated for the same .Limits can then be assigned to this portfolio which will requirecredit approval
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Product Group Overview
Participating Branches & Netting Set
Portfolio
Facility
Miscellaneous
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Key Terms Objective
The objective of Netting is to downsize the agreementsbetween the internal and external counterparty to a single
claim in case of termination of events, bankruptcy ofcounterparties, etc.
In paragon we deal with two types of netting- Credit line Netting- Regulatory Netting
Netting Agreements are captured and are used to netexposures across counterpartys branches that areparticipating in the agreement.
Benefits
Reduction of Settlement Risk Reduction of Credit Risk Reduction of Liquidity Risk
Set of DB (internal) and counterparty (external) entities whichallow for netting according to the legal documentation.
Netting set is captured at facility level Paragon allows multiple Netting Set.
Netting Set
Netting
For more details on Netting please refer the Paragon Legal Module Document.
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Add Product & Participating branches
Add product & Participating Branches screen is opened via Modify Facility Details screen as
shown above
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Add Product & Participating branches
This contain theproducts which isavailable forparticipations fortrading under afacility
Participatingproducts aremoved to thispanel from theavailable productscreen
This contain theCounterpartyname , DB Entity, Facility id &type
This contain theset of ExternalCP which canparticipate in thetrading under afacility.
This contain theset of Rankedinternal CPwhich canparticipate in thetrading under afacility.
This contain theset of UnrankedInternal CPwhich canparticipate in thetrading under afacility.
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Netting Set Status workflow
Clicking Authorize button willresult in error User who has
entered or modified the recordcannot authorize it
This happens because NettingSet works on 4 Eye principle
Login as different user and onpressing the authorize button, itwill be authorized successfully
PGO
Facility List
RejectView Netting Set List
Authorize (Active)
Modify
CP List
Create Netting (PndgAuth)
Facility
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Create Netting Set
To create Netting Set first the counterparty has to be selected. For this user fills in thesearch type and then presses Go button, list of counterparties is displayed based onthe search type
From the list of counterparties , select a counterparty right click and select PGOscreen. From the facility list screen ,select the relevant facility and then click theCreate Netting Set option.
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Create Netting Set screen details
Simultaneously the list of Internalcounterparties eligible for Netting Setgets displayed in this screen
After marking the flag both in external& Internal CP Insert button is pressedand the data from both the screenmoves in to Netting Set screen post
which it is saved & closed .
When from the Product Type QBE a
product is select and the list ofExternal Counterparties getsdisplayed in this window.
Netting Sets are defined for the set of participating branches of the facility .Hence Facilityparticipating branch data is a super set for Netting set
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Create Netting Set screen details
After pressing the insert button the selected counterparties moved to the Netting Setscreen ,the status at this time is Pndgauth .
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Netting Set - Authorization
To change the status from PndgAuth to Active , from the Netting Set list authorization hasto be done from a user other than the user who has entered the record.
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Netting Set - Authorization
Error message got reflected, as User who has entered or modified the record cannotauthorize it since the same user who created the Netting Set also tried to authorize the
netting set.
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Netting Set List- Modify, Delete
Netting Set can be modified or deleted from the Netting Set List.
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Product Group Overview
Participating Branches & Netting Set
Portfolio
Facility
Miscellaneous
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Portfolio List -1
Portfolio list can be opened through PGO screen . Further navigation can also be donethrough individual screens
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Portfolio List -2
Navigation to Create Clustered Portfolio is done through PGO screen
From the CP hierarchy, Select group or the counterparty option, right click and select
Create Clustered Portfolio.
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Modify/View Single Tiled Portfolio
Both single tile portfolio and clustered portfolio is modified via Portfolio list screen. For thisselect the single tile portfolio which has to be modified, right click and hit the modify option.Make the necessary change/s and save the same.
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Create Clustered Portfolio
Navigate to this screen using Create Clustered Portfolio option on Potfolio List Select a counterparty from the CP hierarchy , right click and press View Single Tile
Portfolio.
On click of the said button the list of all the single tile portfolio will be displayed.
C t Cl t d P tf li
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Thispanelshowsthecounterpartyhierarchy
On clickingthis checkboxes allthe SingleTile Portfoliogetsdisplayed
On this panel thesingle tile portfoliogets displayeddependingwhether CP orGroup is selected
This button is used to move theSingle tile portfolios to ClusteredPanel .The single tile goes intopending linked mode andbecomes the part of clusteronce this is approved via creditapplication
This button is used to removethe portfolios from theClustered Portfolio Panel. Ifportfolio is un-clustered the itgoes into pending de-linkedmode and becomes a livesingle tile once this isapproved via creditapplication
On clickingthis checkbox, theclusteredportfolio getsCollateralized
Portfolioswhich has toclustered aremoved fromSingle tile tothis panel viamove button
Create Clustered Portfolio
Cl i C
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Clustering Concepts
Clustering
Grouping of two or more Single Tile Portfolios into a single clustered portfolio againstwhich Credit Officers can set operational limits in a more flexible way. A portfolio can
either be horizontally or vertically clustered.
Vertical Clustering
Clustering across counterparties or facilities but covering a uniform Business Area
Tata Group
Tata AIG
TCS
Tata Sons Ltd ISDA-EQUIV
DB Lon
DB- Tokyo
Facility 1
Legal Agreement DB Entity Business Area Facility
ISDA-EQUIV DB- HK
ISDA-EQUIV DB- SNG Facility 2
Facility 3
Facility 4
FX
ENERGY
BONDOPTIONS
BASE METAL
ISDA-EQUIV REPO
REPO
REPO
REPO
C C
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Horizontal Clustering
Clustering across different Business Areas within a single facility. Paragon will only allow
for the creation of Horizontal Clustered Portfolios in the case of collateralised portfolios.
Exception to the above rule is Repos where Paragon does allow its inclusion into aHorizontal Clustered Portfolio regardless of whether or not the collateralised flag for thefacility has been turned on.
Tata Group
Tata AIG
TCS
Tata Sons Ltd ISDA-EQUIV
DB Lon
DB- Tokyo
Facility 1
Legal Agreement DB Entity Business Area Facility
ISDA-EQUIV DB- HK
ISDA-EQUIV DB- SNG Facility 2
Facility 3
Facility 4
FX
ENERGY
BONDOPTIONS
BASE METAL
ISDA-EQUIV REPO
REPO
REPO
REPO
Clustering Concepts
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M i t i Li it
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Maintain Limit
This screen is used to capture CCE and PFE limits against the Tenors
Vi T d D t il
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View Trade Details
This screen is used to view the trades which have happened as per the facility .Trade(transactions) data is fed from the source systems into Paragon and mapping of the trades
is done manually by Credit Operations team.
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Product Group Overview
Participating Branches & Netting Set
Portfolio
Facility
Miscellaneous
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P d t G O i
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This is one of the most important screens in Paragon . It shows a full summary of thefacilities , limits, exposures and trades for a counterparty
It also provides navigation to various other screens and serve as a entry point to create
facilities, Netting and Clustered Portfolio Each risk module in Paragon has its own PGO screen and navigation to other modulesPGO is provided from each of these screens .Hence by going into one PGO user cannavigate across module data and perform the required activities
Product Group Overview
PGO Key Elements
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PGO Key Elements
This panel shows thecounterparty hierarchyand the details of theselected counterparty
Buttons provided for navigatingto other modules PGO
Option to toggle betweendisplay of live and pendinglimits and net and gross
utilization
This panel gives the
summary of theaggregated limits, facilitydetails etc
This panel shows the
Counterparty aggregatedlimit and utilization &availability
This panel shows theGroup level aggregatedlimit and utilization &availability
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Product Group Overview
Participating Branches & Netting Set
Portfolio
Facility
Miscellaneous
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CSA ID Search
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CSA ID Search
On entering the CSA (Credit Support Annexure) ID the CSA ID & the correspondingfacility ID gets displayed.
Delete Zero Limit
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Delete Zero Limit
To delete the Zero Limit , from the counterparty list , select the counterparty ,right click andclick delete Zero limits.
Post deletion the status will change to Pend-closure. Post credit application process the
Zero Limit would be finally deleted.
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Thank You