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	Advisory
	John, Risk Manager in an international bank has been asked to stress test a portfolio of Bonds and CDS, focusing on the implied basis risk that is captured in the z-spread of the structured deals. The Risk system used by the client's bank did not model the z-spread properly and John needed some support to speed up the portfolio stress test and be ready for the bank ICAAP regulation approval.
RiskWave was approached to assess the issue, suggest and implement a quick solution. We proposed a solution based on implementing a Credit Risky Valuation Model of the Bonds, capturing the credit risk elements - Default Probability, Recovery Rate - and implying a Z-spread representing the basis risk of the portfolio. Riskwave was able to help implement the Credit Risky valuation model and perform the stress testing activities as agreed with the bank.

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