Cutting Edge Analytics
Since the financial crisis of 2008, financial institutions have radically shifted their focus towards active management of the risks associated with OTC contracts. Front office pricing is now tightly connected to traditional middle-office/back-office tasks and parameters such as credit risks, funding costs, and capital costs need to be accounted for in the valuation of the trade
Achieving this requires a fundamental change in the way that a bank prices and assesses the risk of derivatives. Differing degrees of netting set and portfolio aggregation need to be done to sensibly value and analyse the XVA components. Incremental risk measures may need to be calculated and attributed at the individual trade, netting set and bank-wide level. The traditional over-night approach to risk computation now needs to be changed to a near real-time calculation. All of this requires new algorithms (CVA, FVA… XVA), greater computing power and very fast turnaround on risk calculations.
In this video, the renowned risk trainer Justin Clarke will outline the forces driving these changes in banking practice. He will draw from his extensive experience working with banks in Europe, the US and Asia in describing the types of calculations that will be required and the consequent compute load.
Video duration: 55:27