RiskTech Forum

New Functionality For Swap Aggregation Increases CVA & PFE Calculation Speed

Posted: 27 November 2012  |  Source: Numerix


Numerix (www.numerix.com), the leading provider of cross-asset analytics for derivatives valuations and risk management, today announced key features and functionality now available in Numerix CrossAsset, its flagship analytics framework for structuring, pricing and risk managing any derivative.

“The importance of financial and risk management capabilities in portfolio level analytics has never been greater, especially when considering the impact of collateral optimization on CVA, dynamic hedging techniques and managing the regulatory cost of capital,” said Steven R. O’Hanlon, President & COO of Numerix.

Tom Davis, VP of Client Solutions at Numerix adds: “Daily risk assessment across a portfolio needs models that not only preserve the distribution of prices, but also are efficient to compute. In CrossAsset 10.2 this was our focus – empowering clients with the applicable coverage and advanced functionality needed to respond quickly and efficiently to the evolving regulatory and market environment.”

Key Numerix CrossAsset 10.2 functionality includes:

Innovative Risk Techniques to accelerate the computation of exposures and CVA (Credit Value Adjustment)/PFE (Potential Future Exposure) for large portfolios of Interest Rate swaps, FX Forwards and Cross-Currency swaps. By aggregating their cashflows to represent the portfolio as a "superswap" this approach, which is based on aggregating cashflows for linear instruments is used to make the calculation faster.

New Performance Enhancements to improve CVA calculation time for portfolios of credit derivatives with the addition of the CIR Model (Cox–Ingersoll–Ross) for credit pricing and CDS valuation. In addition, calibration of the FX Stochastic Local Volatility model to FX barrier options was enabled as well as Backward Monte Carlo pricing of continuous barriers. This innovation greatly reduces the time taken to price barrier options.

Improved Functionality to manage the complexities of pricing and structuring OTC derivatives. PaymentStream Builder allows users to price any deal streamlining the creation of 80% of the most commonly traded derivatives, reserving the power of scripting for bespoke structured products. Users can enter the conditions of their term sheet and price any bespoke instrument simply and directly, including risky bonds and credit default swaps.