Managing the alphabet soup of XVAs

THE PANEL

• Scott Sobolewski, principal consultant, Quaternion Risk Management
• Peter Zeitsch, solution architect, enterprise risk and XVA trading, Calypso Technology
• Yann Coatanlem, managing director, Citigroup
• Massimo Morini, head of interest rate and credit models, Banca IMI
• Moderator: Duncan Wood, editor-in-chief, Risk.net

Valuation adjustments have a long history in the derivatives market, with some banks starting to price for counterparty risk – or credit valuation adjustment (CVA) – back in the 1990s. But post-crisis regulation has seen other pricing components increase in materiality over the past few years, giving birth to a family of add-ons for own-credit risk, funding and margin consumption, and capital requirements. They are known collectively as the XVAs.

There is little standardisation on how they should be calculated, and few prudential or accounting rules that apply to their use. Debate continues about how best to calculate them – and when, or even whether, to apply them. Organisationally, responsibility for their management might reside with the CVA desk, but other roles and functions – including treasury and funding desks – can be involved.

This Risk.net webinar examines the evolution of the XVAs – and how they are being calculated and managed – with a panel of industry experts. It comes hot on the heels of the September 1 deadline for banks to start exchanging initial margin on non-cleared derivatives – a move after which many expect to see margin valuation adjustment become a significant new component of a trade’s price.

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