Setting up the value-oriented derivatives business securely
There can no longer be any question of ignoring counterparty risks in the measurement and design of the terms of OTC derivatives, whether for individual pricing in customer business or on account of other costs that occur, for example, through hedging the transaction.
A holistic view of individual cost components optimally covers the costs arising from the implementation of a derivative transaction and, based on this, the recoverability of the transaction. In attributing partial or complete costs, as well as in the projection of expected costs, in future there are several aspects to consider. Risk measurement of the counterparty, one’s own risk measurement, own funding costs, the costs of the underlying equity as well as further aspects play a significant role in this.
Our consultants support you in all questions related to value-oriented pricing and measurement as well as the necessary internal processes that a recoverable derivative transaction involves. Here, economic aspects are just as important as regulatory specifications and accounting requirements and we are careful not to lose sight of your business model.
Components and focal aspects to consider
- Measurement and pre-calculation for (structured) derivatives
- xVA Pricing (CVA, DVA, FVA, KVA, MVA & ColVA)
- Discriminate handling of cleared and uncleared positions
- Restructuring of CSA contracts
- Consideration of break clauses
- Requirements from the EMIR concretization of the bilateral collateralization, inter alia, regarding the initial margin (e.g. ISDA-SIMM)
- Standardized method of measuring counterparty risks with SA-CCR
- CVA risk capital charge