SunGard has extended its Adaptiv suite of solutions to help customers not only calculate Credit Valuation Adjustment (CVA) but also actively manage it. Adaptiv CVA Studio now helps traders hedge their CVA exposure, minimize their firm’s earnings volatility and understand the direct impact of CVA on their P&L.
Basel III’s CVA mandate will require banks to hold more capital for counterparty credit risk. This is expected to reduce the return on equity and therefore have a direct impact on the profitability of the over-the-counter business lines within many organizations, from global banks to regional franchise banks. Adaptiv CVA Studio helps traders dynamically hedge CVA volatility by offering the ability to calculate and view sensitivities, manage and hedge credit risk on their books, and calculate P&L and P&L Predict.
Adaptiv CVA Studio includes a Monte Carlo calculation engine for measuring risk and a trading-style interface to display counterparty and hedge positions in a single view of P&L and key risk metrics. The solution can run over one million valuations per second per processor core, helping customers achieve greater accuracy in their valuations by avoiding approximation techniques. Adaptiv CVA Studio can accurately calculate multiple risk measures on a CVA book to help manage volatility, including CVA, Debt Valuation Adjustment (DVA) and Funding Valuation Adjustment (FVA), sensitivities, stress scenarios, P&L attribution and P&L predict. Accurate CVA calculations help banks improve their selection of counterparties by helping them more precisely assess counterparty risk.
Juerg Hunziker, president of SunGard’s Front Arena and Adaptiv business units, said, “As the impact of Basel III on both profitability and earnings volatility is better understood, banks are establishing CVA functions to support compliance and improve how they manage P&L. Adaptiv CVA Studio can help by providing a complete view of CVA and transparency into credit risk using technology that can be quickly rolled out to traders and CVA managers across the organization.”