Front-Office xVA Solution

Gain the flexibility required for sensitivity analysis, hedging and reporting

Demand is increasing in the front office for xVA analytics that enable banks to remain competitive by pricing risks and regulatory capital charges into their trades. Adopting such a framework presents numerous challenges, including the range of calculations involved, the computational power required and the management of xVA volatility.

Summary

IHS Markit’s Front-Office xVA Solution supports an extensive range of pricing valuation adjustments, including CVA, DVA, FVA, MVA and KVA, across the full range of asset classes and financial instruments. The solution addresses the challenges of speed, volume and complexity, providing the flexibility that active desks require for sensitivity analysis, hedging, stress testing and reporting.

You receive fast and flexible xVA analytics across all asset classes, including interest rates, inflation, foreign exchange, equity, commodities and credit. Efficient pre-trade calculation of incremental changes to pricing valuation adjustments ensures pricing and hedging decisions are made in full knowledge of P&L and capital impact.

The solution supports the highly variable computational demands of your financial institution through the use of a server grid. The flexibility and open structure of the solution’s underlying architecture mean firms can easily add or integrate new models as required.

Key benefits:

  • Cutting-edge technology stack – Leverage an open, extensible platform that uses best-of-breed components. IHS Markit leverages industry-leading technologies in the distributed processing and application space. This includes using a subset of the Apache big data technology stack to underpin the Front-Office xVA Solution. Flexibly deploy the solution using the implementation model that best suits your firm, including hosted, managed service and on-premises installation.
  • Regulatory support – Support your compliance processes for ASC 820 (FAS 157) and IAS 39, and get the risk measures required for Basel II and Basel III. An SA-CCR module is embedded within the Monte-Carlo engine, allowing for projection of the measure as required for an accurate KVA methodology. FRTB-CVA capital rules leverage sensitivities in the calculation of CVA capital, supporting impact studies.
  • Fast, detailed results – An accurate full revaluation approach provides batch, real-time and pre-deal xVA with sub-second turnarounds without the use of approximations. The solution supports full sensitivities, including deltas, gammas and cross-gammas, and lets you slice and dice trade-level results using the dynamic interface.
  • Flexibility – Add and integrate new instruments, models and risk measures. Use our state-of-the-art yield curve bootstrapping framework to build interest-rate curves and calculate xVA sensitivities directly on market quotes. Take advantage of the open and easy-to-use sensitivity and stress analysis framework to unify all of your scenario calculations for internal and regulatory purposes on a single platform.

Risk Measures Provided

  • CVA
  • DVA
  • FVA (including re-hypothecation of funds across the funding set and asymmetric funding rates)
  • KVA
  • MVA
  • COLVA (capturing cheapest-to-deliver collateral)
  • Sensitivities
  • P&L attribution
  • What-if analysis
  • Inception pricing/pre-deal analysis

Webcast: CVA and Beyond: SA-CVA Capital Requirements and xVA optimization

In this webinar, Dr. Jon Gregory (author of The xVA Challenge) and senior derivatives pricing experts from IHS Markit discuss SA-CVA capital requirements and xVA optimization. The topics covered include the adoption of CVA and the impact of SA-CVA; funding and integration of CVA and FVA; return on regulatory capital treatment; initial margin requirements and MVA; and xVA origination and optimization.
View Webinar

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