The rise in the number of valuation adjustments known as XVAs has coincided with the continuous post-crisis regulatory and accounting crackdowns on derivatives trading. The impact of XVAs on the risk management function has been challenging for market participants in terms of how to put XVAs into an operational and practical use context. Progress has certainly been made in the industry’s implementation of XVA practices, but to this day XVAs continue to be inconsistently adopted by trading institutions.

A new impact report produced by Aite Group, titled XVA in 2019: Valuations’ Generation X, explores how banks have evolved over the past few years to incorporate the growing family of valuation adjustments for pricing, accounting and regulatory reporting requirements.

The 33-page report, the first in a sell-side risk series for 2019, is based on conversations with heads or members of XVA trading desks as well as pricing and risk management functions at 15 global and regional banks. This study, provided compliments of Numerix, also offers new insights and knowledge into the market issues and trends that are spurring XVA growth and shaping XVA practices at sell-side institutions.

Key topics delivered in the report include:

  • The different ways banks adopt the various XVAs 
  • The challenges experienced in an “XVA journey”
  • How banks are using risk technology to meet complex internal requirements and regulatory demands.
  • The implementation of centralized XVA desks
  • Banks’ use of third-party vendor solutions for their XVA calculations
  • XVA hedging at banks
  • Data challenges and XVA practices

 

ABOUT AITE GROUP

Aite Group is a global research and advisory firm delivering comprehensive, actionable advice on business, technology, and regulatory issues and their impact on the financial services industry. With expertise in banking, payments, insurance, wealth management, and the capital markets, we guide financial institutions, technology providers, and consulting firms worldwide. We partner with our clients, revealing their blind spots and delivering insights to make their businesses smarter and stronger. Visit us on the web and connect with us on Twitter @AiteGroup and LinkedIn.

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The xVA Transformation: Market Perspectives and Best Practices