Yield enhancement strategies for cash rich investors require a very good understanding of the client's investment objectives. Typical challenges include:

• How to define client risk appetite?
• What is an appropriate and suitable product in terms of exposure and payoff?
• When complexity adds value?
• What is the optimal product tenor?
• How to reconcile market expectations with past performance?

Post credit crunch LOCs as a means of funding regulatory capital requirements on XXX business have lost their appeal. The provision of a securitised guarantee in the form of a collateral note was developed as a replacement of LOC funding. Typical challenges to the bank providing the note include:

• How to stress test the note for market and actuarial risks?
• How to specify the minimum risk adjusted yield required?
• How conservative the investor needs to be in the risk calculations?

Under Basel 3 banks are required to fully account for counterparty and funding costs on non-collateralised trades. Typical challenges include:

• When it makes sense to suggest to clients to sign a CSA?
• What is the optimal threshold?
• How the product mix that the client transacts affects CSA negotiations?
• What is the cost of providing multi-currency facilities for collateral purposes?

Equity tranches of securitisations,

although are deposited on a demand account, have an expected duration that is greater from overnight. Typical challenges include:

• What stress factors to apply to the securitised assets for investigating the
• equity tranche expected duration and corresponding interest rate that the bank may afford to pay?
• How to take into account the non-normality of the risk factors?
• What variance/covariance matrix inputs to use?