The Challenge
Zanders is an independent firm providing treasury, risk and finance solutions to corporates, financial institutions, public sector and non-profit organizations. The firm has operations throughout the world and has offices in the Netherlands, Belgium, Switzerland and the UK.
Many of Zanders’ clients are corporates that do not have the knowledge, resources or time to handle every facet of treasury and risk management such as hedge accounting and valuation. Zanders offers services including independent valuations, outsourced valuations, hedge effectiveness reporting and challenging counterparty pricing.
Zanders continually improves its processes and develops its tools to align with best market practices. This pursuit of best practices led the firm to consider implementing new analytics technology.
One particular area that Zanders wanted to optimize in its valuation process was credit value adjustments (CVA) and debit value adjustments (DVA). Prior to 2013, the firm had been using Excel-based tools to perform CVA/DVA on simple trades, but recognized the calculations on more complex instruments would require an additional tool.
“With IFRS 13, there was a pressing need for robust CVA modeling; auditors want specific exposure and default probability calculations. Regulatory complexity, combined with shifting market practices in terms of Libor and OIS, means that corporates need additional expertise in treasury and risk management. That’s why they turn to us.” Pierre Wernert, Valuation Desk Manager - Zanders
Developing a tool in-house was too costly, so the Zanders’ Valuation Desk team began researching analytics tools. The tool needed to be sophisticated, user-friendly, able to value and risk manage any portfolio, and have support from a team with a history of best market practices.
The Solution
During their research, Zanders’ Valuation Desk team came across a FINCAD paper on CVA/DVA. Finding the paper informative, they reached out to FINCAD to learn more. This conversation led to the decision to implement F3 Excel Edition for valuation and CVA/DVA.
The Results
By leveraging FINCAD F3’s comprehensive, accurate, and transparent analytics to perform the heavy lifting of computing valuations and CVA/DVA, Zanders can focus on managing the risk of their clients’ multi-asset, multi-currency portfolios.
Zanders is benefiting from valuable time and resource savings by no longer needing to develop models from scratch.
“F3 has helped us introduce more stability and more consistency across our valuation models. We have become less dependent on our in-house model, which required a lot of memory to run calculations. Furthermore, the speed of FINCAD F3’s calculations is remarkably fast — particularly when performing complex valuation adjustments.” Pierre Wernert, Valuation Desk Manager - Zanders
In the near future, Pierre anticipates even more regulation coming into place aimed at reducing counterparty risk and increasing transparency (like IFRS 9). He expects Corporate Treasurers will feel the impact.
“The regulatory environment has introduced real complexity around calculating CVA/DVA that many Corporate Treasuries are not prepared to handle. F3 allows us to provide our clients with accurate valuations in compliance with IFRS 13, on a wide range of financial instruments.” Pierre Wernert, Valuation Desk Manager - Zanders
To address these changes, Zanders plans to build out its use of F3 to further enhance its existing services and handle greater complexity in a robust environment.