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A-Team Insight Blogs

SuperDerivatives Combines Market Data and Calculation Engine to Deliver Credit Value Adjustment Solution

SuperDerivatives has completed development of a credit value adjustment (CVA) solution for OTC derivatives portfolios and incorporated it into its eValueX valuation service, CorporeX corporate risk and compliance system, and SDX front-office system. Results of CVA calculations can be received by SuperDerivatives’ users as Excel or XML files that can be integrated back into their systems, while customers that do not use other SuperDerivatives systems can use the solution on a stand-alone basis.

The solution allows users to define a CVA method that suits their valuation requirements and enables the adjustment of mark-to-market valuations and processing of new contracts to reflect the counterparty credit risk associated with trades that are not fully collateralised.

SuperDerivatives has developed the CA solution in stages over the past nine months and it has been deployed by eight customers, two being large audit companies that will run it for their own customers. The others are corporates that must comply with regulatory changes in accounting that take effect at the start of 2014 and require evaluation and reporting of exposure to counterparty credit risk, and banks that must make CVA calculations to fulfil forthcoming requirements in European Market Infrastructure Regulation (EMIR) and Dodd-Frank legislation.

Yuval Levy, chief technology officer at SuperDerivatives, explains: “As CVA can be calculated using a wide variety of methodologies, all requiring adjustment to changes in the market, the solution we built had to be both flexible and easy to use. The SuperDerivatives’ CVA solution is a combination of our high quality market data and proven calculation engine, delivered through a simple, intuitive interface over the cloud.”

Robert Emerson, head of interest rates at SuperDerivatives, reports a spike in demand for CVA solutions in the run up to EMIR and Dodd-Frank, and suggests client numbers will rise quickly and that the company’s CVA solution will be one of its fastest selling products with sales being driven by both existing and new clients.

Beyond CVA, SuperDerivatives is keeping an eye on, but not yet working on, funding valuation adjustment, which has not been mandated by regulators but may be in future.

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