The Rise of xVA and How It Transformed an Entire IndustryOver the last decade, the banking industry has had to traverse immense change, particularly regulatory changes effecting derivatives trading operations. The effect, according to Risk.net, is estimated at billions of dollars of P&L impact across the industry. Concurrently, these regulations lead to a growing number of pricing valuation adjustments, known collectively as xVAs, and they fundamentally changed the pricing of derivatives contracts and altered the ways banks make trading decisions. These adjustments have also led to alterations in bank structures, such as the overhauling of IT systems and organizational fixes to trading operations.

In this white paper, Satyam Kancharla, Chief Strategy Officer at Numerix, brings to light how xVAs have become the posterchild for risk-informed decision making and the key to unlocking trade profitability across capital markets.

He addresses the following issues, among others:

  • How xVA became a transformational force for OTC derivatives trading
  • The establishment of xVA desks and the data challenges they present
  • Why the successful management of xVAs requires the cooperation of separate business functions, such as front office, treasury, finance, compliance, and market and credit risk
  • How coming regulatory changes could further evolve the xVA landscape


Author Biography

Satyam Kancharla, Chief Strategy Officer & Senior Vice President, Client Solutions Group, Numerix LLC

Mr. Kancharla, as Chief Strategy Officer and Senior Vice President, is responsible for corporate strategy and currently heads the Client Solutions Group at Numerix. This group is responsible for Product Management, Financial Engineering and Business Analysis. Prior to this, he has served in various roles in Quantitative Software Development, Financial Engineering and Client Services at Numerix. Before transferring to Numerix in New York City, he was the CTO for Numerix Japan LLC in Tokyo, heading the Pre-Sales and Financial Engineering teams for Asia.

Prior to joining Numerix in 2003, Mr. Kancharla also worked with Merrill Lynch and GE Capital in Quantitative Finance and Product Development roles.
He holds an MBA degree from New York University’s Stern School of Business, an MSc degree in Applied Statistics and Informatics from Indian Institute of Technology, Bombay and a BSc in Mathematics and Computers from the University of Mumbai.

 

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