CVA/DVA Pricing with F3

While having the ability to calculate Credit Value Adjustment (CVA) or Debt Value Adjustment (DVA) on your portfolio is important, it can be quite difficult to achieve. However, with FINCAD's solution, you can calculate CVA (or DVA) on any trade or netting set.

F3's innovative approach to CVA pricing treats it as a specific calculation application, in principle no different from pricing complex derivatives. This allows CVA to be calculated using the same models and generic Monte Carlo pricing engine as for any other exotic trade. The generic design can handle all types of financial contracts.

First Order Sensitivities Available - Universal Risk Technology™

By leveraging F3's generic pricing engine to calculate CVA, the benefits of its Universal Risk Technology (URT) can be exploited. This patent-pending technology provides fast first-order sensitivities without using finite difference methods ("bumping"). With this technology, the computational time for the sensitivities depends only very weakly on the number of risk factors being evaluated.

F3 allows you to use unlimited market data and risk factors in its cohesive pricing framework to capture the sensitivities of CVA to all market quotes, parameters, and notionals. These can be used to calculate hedge factors, pre-trade estimates of incremental CVA, and more.

Get the Speed You Need - Faster Calculations

We all know that performance matters and with F3 you get the speed you need to price CVA on a wide range of instruments. F3 leverages software optimization techniques like lazy evaluation and object re-use that will provide fast calculations.

Key Benefits
Any trade or netting set	Easy extension of vanilla and exotic financial instruments pricing to CVA calculation on same instruments with one function call Common vanilla examples might include: interest rate swaps, swaptions, FX swaps/forwards/options, cross-currency swaps F3's generic engine can just as easily calculate the CVA for structured products, cross-asset instruments, or hybrids
Netting & Collateral	Calculates CVA by netting set, including the impact of any collateral agreement Use pre-built or user-defined collateral rules Unilateral or bilateral CVA / DVA
Data management	Non-existent or illiquid CDS instruments can be synthesized using a custom credit index with specific modeling assumptions Building multiple netting sets and aggregating all data sources will be efficient and robust. Our integration experts can assist with integrating multiple pricing and risk systems into a consolidated framework
Hedging	Calculate equivalent notionals to hedge CVA volatility Computational time is almost independent of the number of risk factors
Incremental (Pre-Trade) CVA	See the impact of prospective trading positions in real time before trade execution. F3's unique technology estimates pre-trade incremental CVA, to provide the CVA P&L impact to the trading desk to motivate trading decisions that more accurately take counterparty credit risk into account.
Allocation	Allocation of CVA by individual trade, trader, or trading desk to accurately allocate CVA charges accordingly Ideal when going from counterparty-level CVA to desk or trader level allocations
Wrong Way Risk	Account for correlation between counterparty exposure and default risk, for a complete evaluation of your CVA, and to meet regulatory requirements
Margin Period of Risk	For collateralized netting sets, quantify the impact on CVA of the delay between the last exchange of collateral and the close-out of the counterparty

To find out more about CVA, request a customized demonstration.