2024-02-02

STELLE NICHT MEHR VAKANT - BITTE NICHT MEHR BEWERBEN!!!

Terms of Reference for a Short-Term Consultant

Strengthening IFC's quantitative methodologies
in the context of economic capital estimation and allocation

International Finance Corporation - World Bank Group
Corporate Risk Management Department (CRM)

Background

The International Finance Corporation (IFC), a part of the World Bank Group (WBG), supports economic growth by promoting private sector development in its developing member countries through long term financing and advisory services. IFC finances investments which have a significant developmental impact, are commercially viable, environmentally sustainable, and socially sound.

Located within IFC's Corporate Risk Management Department (CRM), the Capital Management and Enterprise Risk (CRMCA) team focuses on maintaining IFC's risk appetite and capital adequacy consistent with risk level of a AAA rating. Activities include economic capital modeling, forecasting, stress testing, loan pricing, risk-adjusted performance measurement, and operational risk. CRMCA also reviews the quantitative performance of IFC's rating system and provides estimates for risk parameters such as PDs or LGDs.

IFC's economic capital estimation utilizes a Monte-Carlo simulation to generate a potential loss distribution and allocate losses to individual investments according to their contribution to the total loss. To operationalize the capital allocation, a closed-form tool (Economic Capital Estimation Tool, ECET) has been developed to mimic the capital allocation and estimate capital requirements for new investments added to the portfolio.

Duties and Accountabilities

The Short-Term Consultant (STC) will, under supervision of senior staff, support the ECap team within CRMCA in strengthening and enriching the pool of statistical tools and approaches available in the estimation and allocation of economic capital requirements. This includes the review of approaches already in place, the expansion of CRMCA's capabilities to perform statistical analyses, the implementation of tools to execute the respective analyses, as well as identifying the limitations of the applied approaches.

Specific work items include:

• Strengthening of the statistical tools in the context of IFC's Economic Capital estimation.
  • Conduct and summarize a literature search on the mathematical foundation of the calibration problem at hand.
  • Review of the current optimization approach to calibrate the parameters of ECET.
  • Assess, quantify, and interpret the quality of the parameter estimation and model.
    • Review the current mitigation approaches against modeling errors.
    • Develop, where applicable, confidence ranges to assess the estimation quality.
    • Improve the understanding of the capital allocation in boundary conditions (e.g., for very-low or very-high risk investments)
    • Develop, implement, and perform additional quality tests as warranted.
  • Investigate the impact of exposure concentrations on capital requirements, with the goal to integrate them in the functional form of ECET.
  • Investigate and integrate the impact of other drivers for capital requirements into ECET (such as geographic concentration, country crises, or rating migration patterns)
• Maintain and update the documentation of methodologies, tools and models.
• Implement, or plan and conduct the testing of any new model developments.
• Support tasks regarding any external review of the ECap ecosystem (as required).
• Design, document, and implement additional statistical models (as required).
• Other ad-hoc tasks (as required).

Deliverables include the documentation of research and proposed solutions, as well as the technical documentation of working solutions. The sequence and timing of the tasks mentioned above will be coordinated with CRMCA depending on the priorities at the time.

Timetable

This assignment is expected to start as soon as feasible in 2024, with flexibility to organize the assignment as a part-time or full-time engagement. Initially limited to June 30, 2024, follow-up assignments are possible, depending on the progress, additional work items identified, and the complexity in implementing working solutions.

Confidentiality Statement

All data and information received from IFC for the purpose of this assignment are to be treated confidentially and are only to be used in connection with the execution of these Terms of Reference. All intellectual property rights arising from the execution of these Terms of Reference are assigned to IFC. The content of written materials obtained and used in this assignment may not be disclosed to any third party without expressed and advance written authorization from IFC.

Selection Criteria

• A masters or PhD in mathematics, statistics, quantitative finance, or equivalent skills. Prior work experience is not required.
• A good understanding of statistics, statistical methods, including the estimation/calibration of model or distribution parameters, as well as of the methods' limitations.
• An understanding of quantitative methodologies used in economic capital modeling (such as Monte Carlo simulations, VaR/ES, ASRF-model, risk ratings and rating migrations).
• Experience handling and analyzing data sets with analytical tools (ideally Excel and Python).
• Motivation to work in a challenging international and multicultural work environment.
• Knowledge of financial markets and investment products is considered a plus.
• Robust writing and presentation skills in English.
• Duty station for the assignment is Vienna, Austria.

The minimum daily rate for short-term consultants at the Vienna office is 177€. Overpayment is possible depending on experience and skills.

Application Submission Details

Please email applications (including a current CV) by February 15, 2024,
to both Aurele Houngbedji (maiahoungbedji@ifc.org) and Severin Resch (sresch@ifc.org).

In the subject line of your email submission, please include the following text: "STC: Economic Capital".

At the application please refer to the FAM-jobs webpage.