PUBLISHED:
8 January 2018
6:41 PM
BY:
Ria Sharma, triCalculate Sales
XVA is a term used to reflect the various ‘valuation adjustments’ that are made to the price of an OTC derivative transaction to accurately value the costs of the contract.
While still a new concept for the buy-side, XVAs are now relatively well known on the sell-side. Following the financial crisis, the costs associated with trading OTC derivatives were brought to the forefront for banks – credit risk used to be free, now it’s not. XVAs are a means of quantifying credit risk (CVA) and other costs associated with trading OTC derivatives.
The current market standard valuation adjustments are CVA, DVA, FVA, MVA and KVA.
Increasingly, these XVAs are being passed on to buy-side clients, who are getting charged by their provider banks for reasons that may not be clear to them yet.
Implications for the buy-side
Why should buy-side firms analyse XVAs?
As costs of trading OTC derivatives continue to increase, buy-side firms need transparency into what they’re being charged by their provider banks and why.
With the web-based triCalculate service, buy-side market participants can easily, quickly and accurately calculate the XVA numbers themselves. Through understanding XVA costs, buy-side firms can:
For more information about how triCalculate can help buy-side firms, view the webinar or the factsheet, or book a free demo. You can contact us at tricalculate-enquiry@nex.com.