NumerixCVA Brochure

8/11/2019 NumerixCVA Brochure

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Numerix CVA

Regulatory compliance, including BASEL III

CVA trading & hedging

Incremental/marginal CVA, DVA & FVA

Real-time for individual counterparties

Intraday CVA batch

Industry leading model & trade coverage,including full hybrid modeling

#1Risk Management -

Market & Credit

#1 in CVA


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NUMERIX CVA

Whether seeking to meet Basel II and III or other regulatory requirements,

hedging or actively trading your CVA positionsNumerix provides the awardwinning, cross-asset CVA analytics you need to manage your counterparty risk

across the institution, giving users the ability to calculate, analyze and limit

exposures across business units and optimize capital allocation reduction

through Basel III compliance, with fast and accurate CE, PFE, CVA, FVA and DVA

calculations, using an accelerated Monte Carlo simulation engine.

DATA PFE ENGINE CALIBRATION WRONG-WAY RISK PRE-DEAL IMPACT SENSITIVITIES FOR HEDGING

In choosing Numerix CVA, we received the best

performing methods for each instrument category

and a reliable, flexible CVA solution, that above allelse was easy to use.

Head of Risk Methods & Valuation, pbb Deutsche

Pfandbriefbank


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Key Features

Unilateral or bilateral CVA with deal price, deal aging, collateral posting and netting agreements

Stress testing and drill-down based on business unit, instrument type, desk, position,

maturity bucket or custom factors

Easily integrate new trade types, including exotics

Incremental CVA & PFE in real-time

Intra-day CVA & PFE calculations for large portfolios

Consistent model calibration for both market scenarios and deal prices

Import trade, market and reference data from multiple trading and risk systems

Fast American Monte Carlo engine for complex derivatives

Trade upload from all leading lifecycle management & trading systems

USER INTERFACE


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NUMERIX CVA WORKFLOW

Trade Data

Market Data

ReferenceData

Market-Evolution

Model

Pricing Model

Deal-Aging Model

Counterparty-

Default Model

Wrong Way

Risk Model

Data

Cleansing

&

Normalizing

Netting

Agreements

Collateral

Agreements

(CSA)

Wrong Way RiskAssumptions

+

+ DVA

CVA

CE

PFE

FVA

When it comes to Enterprise Risk Management,

Numerix topped the credit value adjustment

(CVA) category in the risk management section.

RiskDecember 2011, #1 CVA Winner Risk

Technology Rankings


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SIMULATION METHODOLOGY

PFE Engine

Leveraging the power of Numerix CrossAsset analytics,

Numerix CVA aggregates several algorithms to

generate potential future exposure at all levels

of trade hierarchy, from counterparty and portfolioto individual trade level:

Pricing Model:Determines how deal prices are

calculated in the simulation: fast analytical models

can be used for linear and vanilla deals, while complex

deals can utilize the advanced term-structure model.

Market Evolution Model:Generates simulationpaths and derived market data. By using the same

calibration as the pricing model, calculated CVA is

consistent with the price of the instruments embedded

credit risk.

Deal Aging Model:Calculates exposure for complex

instruments with embedded options that, if exercised,

can significantly alter the risk profile. For example,

a deal may include an option that may be exercised

if the prevailing interest rate rises above a certain level.

The model incorporates this potential change into

exposure calculations by simulating the market data

associated with the exercise event.

CVA Engine

Numerix CVA integrates the output of PFE Engine

with counterparty default data to generate CVA

and regulatory reports.

Netting Agreements:Defines how credit exposures

from multiple deals with the same legal entity are

offset against each other.

Collateral Agreements (CSA):Specifies the treatment

of collateral, including threshold and posting

delay, enabling potential-exposure calculations ona collateralized or uncollateralized basis.

Counterparty Default Model:Defines how default

events are simulated, using either a default/

no-default assumption or a rating-transition model.

Wrong Way Risk Model Assumptions:Describesthe relationship between default events and

the counterpartys exposure (either uncorrelated

or wrong-way correlated).


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RUN INTRADAY CVA WITH AMERICAN MONTE CARLO

The American Monte Carlo is the most effective calculation

approach for computing CVA of nonlinear instruments.

For most instrument types, it can calculate the entire

exposure surface (exposure distributions on multiple

observation dates) at once.

It is the only computationally effective method for

exotic instruments, and the most effective method fornon-linear vanilla instruments. In batch mode, Numerix

CVA achieves orders of magnitude higher performance

compared to valuation of the same portfolio, by computing

multiple instruments together. In detailed mode, where

each instrument must be calculated independently, the

calculation time of CVA is similar to that of valuation.

Numerix is one of the pioneers of American Monte Carlo,having independently developed an optimized version

of American Monte Carlo for cross currency derivatives

valuation in 1997, which we called generic tree

(Mechkov, Linde, Sokol 1997). This method has undergone

extensive customer testing and peer review over the

past 14 years, and is used by most of our 700+ customers

across all of our valuation and risk products.

The American Monte Carlo: This highly

efficient model uses the same set of paths

for both market scenarios and prices,

eliminating the need for a Monte Carlo-on-

Monte Carlo computation, making intraday

CVA computations possible.

Interoperability with Numerix CrossAsset Excel

Any deal in Numerix CVA can be exported into self-contained Numerix XML files that

capture all calculation inputs including reference, market, calibration, and trade data.

Once converted to XML, the deal can be re-imported into Numerix CrossAsset Excel

for additional analysis and validation.

With the high performance Numerix CVA Monte

Carlo engine, real-time calculation of CVA per

counterparty for the entire firm will be possible.

Head of Risk Methods & Valuation, pbb Deutsche

Pfandbriefbank


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LEVERAGING THE POWER OF NUMERIX CROSSASSET

The Numerix Hybrid Model Framework:Unifying All Asset Classes

Select desired models based on underlyings, and

use them as building blocks for the hybrid model:

Our joint calibration process provides more accurate

calibrations of the entire option set by taking into account

the effects of model components.

#1 in CVA

Copyright 2012 Numerix LLC. All rights reserved. Numerix, the Numerix logo, and CrossAsset are either registered trademarks, or trademarks, of Numerix LLC in the United States and/or other countries.

Leading the Industry in Advanced Models and Methods

The Numerix CrossAsset library offers the industrysmost comprehensive collection of models and methods,allowing institutions to price any conceivable instrumentusing the most advanced calculations, in addition toa wide range of calibration options for generatingmarket-consistent valuations. With an infinitely flexiblearchitecture for defining bespoke dealsand the abilityto integrate your own internal modelsNumerix allowsyou to deploy a unified pricing and risk solution for allyour OTC positions across all trade types.

CrossAsset Coverage & Full Transparency

Clients have access to models for all asset classes,including: fixed income, inflation, credit, equity, FX,commodities and hybridsalong with full transparencyinto model assumptions and numerical methods.

Advanced Modeling for Hybrids

Our unique hybrid model framework enables theproduction of consistent scenarios among multiplerisk factors, which is critical to producing robustCVA calculations. The framework produces accuratevaluations for instruments consisting of multiple

underlyingstaking into account correlation among asset

classes. It allows you to select the best model for eachcomponent of a hybrid deal, and then define correlationsbetween equities, yield curves, credit curves, currencypairs and FX rates. The joint calibration process weprovide results in more accurate calibrations of theentire option set by taking into account the effects of

model components during calibration.


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www.numerix.com

Corporate Headquarters

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Sydney, NSW 2047Tel: +612.8216.0757

Numerix LLC

Canada/U.S.

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V7X 1M7Tel: +1.604.566.9655

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NumerixCVA Brochure