How to run CVA calculations with dynamic or static credit processes

PUBLISHED:
10 November 2016
6 AM

BY:
Thomas Griffiths

There are many opinions in the industry when it comes to calculating wrong way risk (WWR).

Should you use a systemic or idiosyncratic WWR calculation? How do you calculate WWR without blowing up the computational time of your overnight batch? Is it worth including WWR in your CVA numbers? What is the cost of not including WWR?

triCalculate’s flexible structure can accommodate runs in one of two ways:

  1. Includes WWR using a dynamic, stochastic credit process or
  2. Uses a static, deterministic credit model

How it Works

The modelling behind the triCalculate engine allows this computation to be done in a fraction of the time of old fashioned Monte Carlo approaches, removing computational constraints.

This advanced computational capability allows the user to choose whether or not to include WWR in XVA calculations. It also offers the ability to quantify the impact of including WWR in CVA, DVA and FVA numbers.

triCalculate’s web-based solution can do this in four simple steps. Contact us and a member of our Valuation Analytics team can walk you through the process.

Below is an example of a portfolio of 10,000 trades across 100 netting sets, including the time taken to calculate and display the results:

Dynamic Credit: 
CVA = 18.781m EUR
DVA = 9.298 m EUR
FVA = 5.391 m EUR
Calculation time = 29 min 19 secs
Static Credit:
CVA = 18.891 m EUR
DVA = 8.632 m EUR
FVA = 4.712 m EUR
Calculation time = 3 min 56 secs


Questions

If you have any questions about triCalculate, or would like assistance viewing, understanding or analysing your XVA results and calculations please contact us via email at [email protected]<script data-cfhash="f9e31" type="text/javascript">/* */</script> or speak to your local office.