Adaptiv CVA Studio

Accounting regulations and Basel III have put Credit Value Adjustment (CVA) firmly in the spotlight. Basel III mandates the calculation of an additional CVA capital charge for OTC positions. This will have a direct impact on the profitability of existing OTC business lines within many organizations, from global banks through to regional franchise banks.

Will central clearing and the trend for increased collateralization negate the need for CVA management? Without a doubt it will have an impact, but neither collateral agreements nor CCPs completely eliminate credit risk. And commercial banks will always have a significant business in OTC derivatives with corporate customers with little or no exposure mitigation. The need for CVA is here to stay. In fact, the emergence of the CVA desk has been one of the noteworthy trends in the front office over the last few years.

This is forcing institutions to look ever more closely at CVA. Traders now have to factor in the cost of credit risk when making trading decisions, and CVA needs to be a key part of the daily workflow.

Calculating CVA allows you to be aggressive in your pricing of certain transactions while understanding where the CVA makes a new transaction uneconomic at a price. Using CVA effectively also helps you improve counterparty selection and manage and hedge the credit risk on your books.  

Features
  • Captures counterparty and hedge positions in a single view with profit and loss and key risk metrics
  • Supports comprehensive active management of CVA within the front office
  • Provides daily calculation and active management of CVA, DVA, FVA, sensitivities, and profit and loss across asset classes, portfolios and counterparties
  • Lets you load and drill into CVA and other risk numbers for deeper quantitative analysis
  • Facilitates pre-deal calculation of incremental CVA charges for new trades
Benefits
  • Enables hundreds of sensitivities to be calculated daily without relying on approximation techniques
  • Is simple to implement and use
  • Provides a single, intuitive view in which you can manipulate portfolios, collateral agreements, market data or stochastic models to see the impact on CVA and sensitivities
  • Lets you enter hedges on a what-if or committed basis to see the effects on the book’s profit and loss

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