12 December 2016
Recognising the importance of accuracy in public reporting, triCalculate now incorporates a mathematically sound and easy to produce methodology that splits the CVA of a netting set into a value for each of the underlying trades to accommodate new balance sheet reporting requirements.
CVA is defined as the valuation adjustment required to take into account counterparty risk. By definition it is calculated at a counterparty / netting set level. While it is not necessarily intuitive to look at the CVA on a trade by trade basis, triCalculate is able to provide a way to achieve the new accounting standards for balance sheet reporting based on the Euler allocation methodology.
How it Works
triCalculate incorporates the Euler allocation methodology to achieve valuation per trade. This technique allocates CVA to a trade by measuring the impact each individual trade has on the overall netting set CVA using an infinitesimally small shift in a trade’s notional. By ticking a simple batch setting users are able to include the Euler allocation calculation in their numbers. This will enable a firm’s finance function to create the balance sheet as they see fit without the constraint of producing numbers on a netting set level.
To include the Euler allocation functionality in your triCalculate results, simply follow these steps:
If you have any questions about triCalculate, or would like assistance viewing, understanding or analysing your XVA results and calculations please contact us via email at [email protected] or speak to your local office.