Blog

March 2014

Funding Valuation Adjustment (FVA), Part 1: A Primer

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March 20, 2014

The implementation of new regulations including Dodd-Frank, MiFID II, EMIR and Basel III is significantly increasing the cost of capital and forcing banks to re-evaluate the economics of their OTC trading businesses. Understanding trade profitability becomes critical with banks now pricing all the components of a trade including the model value using the appropriate discounting curve, the Credit Valuation Adjustment, the Cost of Regulatory Capital and most recently the Funding Valuation Adjustment. Read More

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Conversation with Hannan Mohammad, Deputy Head of the Funding and Markets Division, AFD

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March 12, 2014

The Agence Française de Développement (French Agency for Development - AFD) is a public development finance institution that has been working to fight poverty and foster economic growth in developing countries and the French Overseas Provinces for seventy years. It executes the policy defined by the French Government. AFD is present on four continents where it has an international network of seventy agencies and representation offices. Read More

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January 2014

Quantifi has been positioned as ‘Category Leader’ in the Chartis RiskTech Quadrant for Buy Side Risk Analytics

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January 14, 2014

Buy-Side firms are witnessing a rapidly changing operating environment and need to not only comply with regulations but also adapt to a new marketplace. Quantifi’s solution for buy-side analytics is an integrated Portfolio Management Systems. As well as integrating all regulatory and industry practices, Quantifi applies the latest technology innovations to provide new levels of usability, flexibility, and ease of integration. This translates into dramatically lower time to market, total cost of ownership and significant improvements in operational efficiency. Read More

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December 2013

Managing Counterparty Credit Risk – Part 2: Hot topics related to counterparty credit risk

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December 2, 2013

Are CCPs the optimal answer to managing counterparty risk or are they creating more issues than they solve? There is a recurring question on the nature of Credit Value Adjustment: should the default probability measure applied to CCR be risk neutral or should it be real world (e.g. based on internal or external ratings)? How should FVA be measured and possibly optimized in regards to the Credit Support Annexes? Read More

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OIS Discounting – Part 2: The New Interest Rate Modeling Paradigm

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December 2, 2013

Clearly the credit crisis had a significant impact on the interest rate markets. These changes have driven a profound shift in the way all OTC products are valued and risk managed with the result being an abandonment of the classic derivatives pricing framework based on single interest rate curves. The old-style no-arbitrage valuation framework has been permanently changed by the credit crisis with the introduction of a new approach that takes into account current interest rate dynamics and market segmentation using multiple curves. Read More

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November 2013

An Interview with John Burkert Managing Partner at Tiden Capital

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November 13, 2013

Tiden Capital is a private investment company with over $100 million in assets under management. The firm is focused on relative value and corporate structured credit opportunities, including CDS and CDS index tranche products. Read More

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September 2013

Quantifi's London Risk Conference - Transformations in the OTC Market

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September 3, 2013

Senior practitioners from across the industry provide their views on the developments and key challenges facing the OTC market. What do you consider as key challenges facing the OTC market going forward?  Read More

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July 2013

Basel III & Systemic Risk

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July 11, 2013

The recent crisis highlighted the additional ‘systemic’ risk that the failure of one large institution could cause the failure of one or more of its counterparties, which could trigger a chain reaction. Since Basel III may not explicitly state how some of the new provisions address systemic risk, some analysis is necessary. Quantitative studies have shown limited impact of the higher capital requirements on the real economy, though banks may choose to curtail or exit certain lending businesses if the returns are too low. Read More

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June 2013

OIS Discounting - Part 1: Interest Rate Modeling

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June 12, 2013

Prior to the credit crisis there were small but generally negligible differences between forward rates implied from interest rate products of different tenors. No-arbitrage arguments held and a six-month rate implied from a three-month rate and a three times six-month forward would match. As the credit crisis continued, the market segmented and this previously arbitrage-free relationship broke down. Following the crisis, interest rate modelling has undergone nothing short of a revolution. During the credit crisis, credit and liquidity issues drove apart previously closely related rates.  Read More

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May 2013

Managing Counterparty Credit Risk - Part 1: Why Measure Counterparty Credit Risk?

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May 6, 2013

Counterparty credit risk (CCR) is currently one of the most complex topics for financial institutions primarily due to its multiple definitions and uses. Therefore, the first question to ask yourself before modeling CCR, is why do you want to measure it?

CCR is the risk that a party, usually to an OTC derivative contract, may fail to fulfill its obligations, causing replacement losses to the other party. This is similar to the standard definition of credit risk in the sense that the economic loss is due to the default of the obligor. Read More

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