Resources

A Modern Approach to CVA:
An Introduction to F3 Technology and its Applications to CVA, CVA Allocation, Incremental CVA and CVA hedging

Join Dr. Geoff Lynch in this free technical webcast discussing how FINCAD's award-winning risk management technology product, F3, takes a modern, unified approach to CVA.

F3's approach to CVA is different from the classical approach used by other systems because it views CVA as a pricing problem from the start. To view CVA in this way, F3 expresses the value of CVA as the value of an equivalent portfolio of synthetic contracts. Since the netting set for which CVA is being sought can be a somewhat arbitrary collection of derivatives the pricing engine required to value CVA must be able to value a generic set of synthetic contracts. F3's pricing engine provides exactly this need and can also simultaneously compute analytic sensitivities of price to changes in market quotes so you can get CVA sensitivities to market and credit risk factors at the same time as CVA itself.

In this webcast you will learn how the unified approach provides access to incremental CVA, CVA allocation, and CVA hedge factors through the computation of analytic sensitivities, resulting in a significantly reduced computational overhead compared to the classical method. In addition, you will also learn more how this unified approach allows you to consider correlations between market risk factors, credit and collateral, and allows the computation of Wrong-Way Risk.

Learn More about F3’s Approach to CVA:

  • CVA as a Pricing Problem
  • Overview of F3's Analytic Sensitivity Methodology
  • Performance of F3's Sensitivity Methodology
  • CVA Hedging
  • CVA Allocation
  • Incremental CVA

Contributors:

Geoff Lynch

Dr. Geoff Lynch

Dr. Geoff Lynch is a Quantitative Analyst on the FINCAD Professional Services team. He supports and provides consulting services to FINCAD's F3 clients. He has delivered successful solutions for clients in areas such as CVA and counterparty credit risk, portfolio-level valuation and analysis, portfolio-level risk as well as bespoke custom solutions for valuing complex structured products. These engagements have been across both the Buy-side and Sell-side as well as for regulatory authorities and supervisory agencies. Prior to joining FINCAD, Dr. Lynch was an investment banking analyst focusing on valuation model development and analysis for various M&A transactions, bond issuances and capital raising initiatives across various sectors including banking and the semi-state sector. In addition, he has also spent three years as a mathematics lecturer at the University of Toronto where he obtained his PhD in Mathematics.


Tony Webb

Dr. Tony Webb

Dr. Tony Webb is FINCAD’s Director of Analytics, and is responsible for defining the development roadmap for analytics across all products, and for external communication of quantitative research and thought leadership. He has been at FINCAD since 2000, working for several years as a quant on various instruments, asset classes and models, as well as on risk and hedge accounting applications. He holds an MA in Mathematics from Cambridge University, an MBA, and a PhD in computational fluid dynamics from the University of British Columbia.