Practical Challenges of Implementing Credit Value Adjustment Methodology

The current financial crisis and the large losses experienced by many financial institutions highlighted that counterparty risk was not well understood. A significant portion of these losses came from adjustments to credit value due to mark to market (MtM) changes in over-the-counter (OTC) derivative products. This has facilitated the development of Credit Valuation Adjustment (CVA) methodology both in terms of best practice for business as well as requirements from regulators.

There are currently initiatives underway to address this:

• A changing regulatory landscape. The recent Basel III regulations aim to strengthen the resilience of the financial system to future shocks. The current European Commission regulatory directive (CRD IV) places requirements on higher capital for counterparty risk, with an emphasis on CVA.
• Changes in the deal assessment and pricing of OTC derivatives within banks. The emphasis is on the development of a robust CVA framework to effectively price in counterparty risk for deals.

The briefing session will focus on the CVA from three specific angles:

1. The challenges of building a robust model to meet these requirements;
2. The challenges to implement this model; and
3. The challenge to ensure that the model both works and meets the regulatory requirements.

The presentations will be followed by a facilitated discussion session where guests will have an opportunity to put questions to our panel.

Programme

8.00 – 8.15 Registration and breakfast

8.15 – 8.20 Opening remarks

Martin Clark, Partner, avantage (UK) Limited.

8.20 – 8.45 Building a CVA model for interest rate products

•    Model Calibration

•    Model Outputs

Ram Ananth, Senior Consultant, avantage (UK) Limited.

8.45 – 9.00 Implementing a CVA model in an ever changing environment.

•    Selling the numbers to the front office

•    System and data constraints

Jonathan Berryman, Head of Credit Analytics and Portfolio Reporting, Standard Bank International

9.00 – 9.15 CVA model validation

•    Validation parameters

•    Ensuring regulatory compliance

Colin Burke, Wholesale Model Validation, Lloyds Banking Group

9.15 – 9.30 Facilitated Discussion: Implementing CVA

Facilitator:  Martin Clark, Partner, avantage (UK) Limited

Panel: Jonathan Berryman, Head of Credit Analytics and Portfolio Reporting, Standard Bank International; Colin Burke, Wholesale Model Validation, Lloyds Banking Group; Ram Ananth, Senior Consultant, avantage (UK) Limited.

Numbers will be limited. To register for this event please sign up here.

For further information please contact  Event Admin.