How to optimise trading decisions with risk-adjusted pricing in your front office

PUBLISHED:
10 October 2018
7:42 PM

BY:
Bishal Thapa, triCalculate Sales

To remain competitive and minimize risk, the front office needs tools be able to measure OTC derivatives trading costs and make consistent pricing and valuation decisions. 

XVAs are a means of quantifying counterparty credit risk (CVA) and other costs such as cost of funding margin, collateral and capital that are associated with trading OTC derivatives. Having a better understanding of XVAs through a centralised source helps the front office provide more competitive, timely and accurate derivatives pricing – as well as understand the cost and risk that they and others pose when entering into a derivatives contract.

triCalculate's XVA pre-deal check tool helps optimise trading decisions in the front office: users can run various pre-trade scenarios across multiple instrument types to better understand incremental XVA costs within seconds. Users also have the flexibility to run various combinations of trades against one or multiple netting sets to determine which netting set is best for that trade.

In speaking with tier 2-3 banks globally, we’re finding that understanding pre-trade XVA is often an infrastructure challenge. Ideally, many people within sales or structuring teams should have as much access to useful information as possible and be able to give indications to clients on the charges involved in different trading scenarios. By giving these teams the ability to check pre-deal prices themselves, with a fast, accurate, and centralised XVA source, resource pain is removed from the trading desk. This allows them to focus on risk management and daily trading processes.

For more on how triCalculate can help optimise trading decisions in the front office: