Blog

TABB Group principal and senior analyst Paul Rowady invited Avadhut Naik, Product Manager, Quantifi to discuss desiloing and defragmentation; primarily aimed at large, complex dealing banks and financial intermediaries on the sell-side. Read More

In the previous two blogs we introduced FVA and described the ongoing industry debate on how to treat FVA, whether as a part of risk-neutral pricing or as an extra cost of a trade. Interest in this topic was recently renewed, particularly in light of the JPMorgan's (JPM) Q4 2013 earnings report on January 14th 2014, which for the first time included FVA. Read More

The simplest and most common circumstance when FVA arises is when a bank has an unsecured trade with a counterparty and hedges it with a secured trade - for example with a CCP. In this case if the value of the trade is positive, the value of the hedge is negative. To cover the margin call the bank has to borrow cash at its funding rate of Libor+s where ‘s’ is its funding spread.  Read More

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

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

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

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

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

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

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