Unlock valuable insights into the financial markets with our collection of whitepapers.
This report covers the competitive landscape for buy-side risk analytics. This report also covers the capabilities and market position of Quantifi for buy-side risk analytics. Chartis believes Quantifi to be one of the leading vendors in the buy-side risk analytics marketplace.
Basel III significantly changes the way in which financial institutions address counterparty credit risk (CCR) and credit value adjustment (CVA).
Institutions need to not only adapt to new ways of measuring and managing risk but may need to reengineer the operating models for substantial parts of their businesses.
CCR can cause significant losses if not managed properly. In response to this pressing matter, regulators have developed a number of alternative approaches to measure this new type of risk, including both standard default risk and market risk, leading to various types of capital requirements. The purpose of this paper has been to assess the impact of these different methodologies on some typical portfolio strategies.
There are two ways for banks to compute CVA VaR, standardised and advanced methods, depending on their current regulatory approval. Furthermore, firms can potentially reduce the capital charges via eligible hedges.
A new generation of interest rate modelling is evolving. An approach based on dual curve pricing and integrated CVA has become the market consensus. There is compelling evidence that the market for interest rate products has moved to pricing on this basis, but not all market participants are at the stage were existing legacy valuation and risk management systems are up to date.
CVA desks have been developed in response to crisis-driven regulations for improved counterparty risk management. How do these centralized groups differ from traditional approaches to manage counterparty risk, and what types of data and analytical challenges do they face?
The objectives of setting up a counterparty risk management process can be split into three categories – CVA pricing, exposure management, and regulatory requirements.
Credit Value Adjustment (CVA) is the amount subtracted from the mark-to-market (MTM) value of derivative positions to account for the expected loss due to counterparty defaults. Debt Value Adjustment (DVA) is basically CVA from the counterparty’s perspective. If one party incurs a CVA loss, the other party records a corresponding DVA gain.
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