Unified Risk Platform for Front Office Trading and Enterprise Risk
Numerix announces today the immediate availability of Numerix XVA, a single platform for enterprise level risk management and front office risk calculations, including pre-trade XVA pricing and profitability measures. As a full stack enterprise solution of real-time counterparty credit risk exposures, funding and capital costs, and pre-trade pricing adjustments can be calculated, assessed and managed from a unified platform resulting in cost transparency, decision support and optimization across all elements of credit, capital and funding.
Spotlight on Derivatives Trading Profitability
The changing regulatory landscape of recent years has led to compressed margins and higher capital costs associated with derivatives trading. To survive and thrive in this new era of derivatives trading, today’s practitioners need to adopt a more integrated and holistic approach for managing risk, assessing trade profitability and allocating capital to their businesses. Thus the need for greater operational efficiency, and the integration of risk and capital analytics into trading decisions is also critical.
“With a smorgasbord of costs and adjustments clearly impacting the bottom line, Institutions require real-time results for fast trading and risk decision-making. With all XVAs incorporated into pre-trade prices, insights into true trade profitability can be obtained,” said Satyam Kancharla, Senior Vice President and Chief Strategy Officer of Numerix. “Numerix XVA can be used as part of a trade profitability framework that enables users to attribute portfolio-level risk, margin and capital analytics back to the trade. By getting the all-in profitability of the trade and observing all of the cost components, customers are empowered to make the most informed decision with respect to trading or risk managing derivatives.”
Achieving Efficiency: Integrating Risk, Collateral and Capital Costs into the Front Office
Underpinned by the robustness and front-office ready models of Numerix CrossAsset Server, Numerix XVA is scalable, transparent, flexible, easy to support, and future-proof. All real-time Counterparty credit risk measures including – CVA, DVA, FVA, PFE, EE, EPE, ENE can be computed as part of an enterprise wide risk management system. Funding costs and Capital calculations, including Regulatory capital, CVA capital charges, Cost of capital (KVA) and Capital simulations to forecast capital requirements can also be determined and leveraged to optimize capital usage, increase return on capital and lower collateral costs.
“The unification of siloed areas, optimization of operations and the integration of risk and capital intelligence into trading – including intra-day or real-time/pre-trade analysis is one of the most important ways to achieve efficiency for a derivatives operation,” said Steven R. O’Hanlon, Chief Executive Officer & President of Numerix. “Numerix XVA provides better control over all components of derivatives risk management. It not only gives users the ability to derive insight into which trades are better economically for their business, but helps to more effectively manage the capital set aside for derivatives trading operations under new regulations. All of these elements must be considered for transparent decision making, strategic planning and the allocation of resources.”