Last month, FINCAD presented at the 5th Edition Fair and Prudent Valuation for Derivatives conference in London. For those unfamiliar with the event, it covered how firms can practically optimise valuation governance to best incorporate the latest XVAs and regulatory requirements.
In my opinion, the conference was a great success. We heard from several knowledgeable speakers who gave practical insight into managing fair and prudent valuation for derivatives. In fact, event delegates from leading firms such as ING Bank, BNP Paribas, RBC Capital Markets and de Volksbankand, were asked to rank each speaker based on their respective presentations. We’re pleased to announce that the presentation given the highest rating of all speakers was delivered by FINCAD’s Christian Kahl, PhD, Director of Quantitative Analytics.
Christian shared best practices in prudent valuation, including how to calculate optimal netting for reduced capital costs. He explained that when it comes to prudent valuation, most banks have been focused on what they need to do to achieve compliance. However, it is equally important to understand how firms stand to benefit from the regulation. In fact, policies set forth by regulators allow for netting that enables banks to realise significant capital savings, which better reflect their true exposures.
Christian went on to explain how firms can attain their maximum netting benefit by focusing on the core additional valuation adjustments for market price uncertainty (MPU) and close-out costs (CoCo). He also discussed how to incorporate both internal and regulatory constraints in a robust quantitative process.
I’d like to highlight that FINCAD’s Prudent Valuation Optimisation service helps many financial institutions reach optimal netting under regulatory requirements. We focus on the AVAs associated with MPU and CoCo, as this is where quantitative optimisation can be applied to the netting of risk exposures. We make the process simple, since we do not require comprehensive knowledge of firms’ internal processes. Our team of experts generate an optimal netting portfolio efficiently, based on firms’ original exposures.
Learn more about our solution for optimising prudent valuation.