Meet international accounting standards with IHS Markit Credit Valuation Adjustment (CVA) calculation service that combines our extensive, independent CDS data, hosted valuations platform and risk simulation engine for OTC derivatives
International accounting standard IFRS 13 requires the reporting of CVA and debit value adjustment (DVA) when determining the fair value of OTC derivatives. Auditors and regulators are now increasing scrutiny of the accuracy and robustness of CVA and DVA calculation assumptions, methodologies and input market data.
Simplified, present value-based approaches and historically estimated default probabilities are not consistent with IFRS 13 principles. Current industry best practices recommend simulation-based approaches and market-implied default probabilities from counterparty CDS curves.
IHS Markit offers a hosted, end-to-end CVA calculation solution. It encompasses market data sourcing, cleaning and storage as well as the estimation of market-implied credit curves for illiquid counterparties, an analytics library of calibrated pricing models and a risk simulation engine. Flexible workflow and configuration tools allow for customization to specific requirements.
Extensive CDS data – Rely on broad coverage for consensus-based CDS curves for liquid counterparties, and a robust framework for market-implied CDS curves for illiquid counterparties
Efficient onboarding and report turnaround – Implement rapid onboarding of new customer portfolios by experienced analysts, resulting in production-quality reports within weeks, while existing customers can quickly obtain CVA reports by supplementing trade uploads with counterparty information
Data integrity – Benefit from the consistent market data, pricing and calibration methodologies used for valuations and CVA calculations
Cross-asset coverage – Find a broad range of vanilla and exotic instruments across asset classes
Risk simulation engine – Leverage our market and credit risk simulation engine, which has been deployed by global banks to calculate CVA