Markit, a leading, global financial information services company, today announced that QuIC Financial Technologies, Inc. (QuIC) has agreed to license calculation methodologies developed by Solum Financial Partners LLP (Solum) to enhance the calculation speed of its credit value adjustment (CVA) solution for counterparty risk managers.
CVA quantifies the credit risk inherent in OTC derivative transactions and is integral to pricing, risk management and accounting processes within financial institutions.
The recent credit crisis triggered a significant shift in the financial industry from passive to active counterparty credit risk management, which requires frequent and accurate computation of CVA and its sensitivities. QuIC's CVA solution helps banks to improve trade pricing and to hedge volatility affecting their CVA better. Credit value adjustment was a source of significant losses during the credit crisis.
Incorporating Solum's proprietary calculation methodology extends QuIC's speed advantage in performing the billions of calculations per second required to gauge counterparty risk at the portfolio level and will help financial institutions run CVA analyses even more efficiently and frequently, without additional or specialised hardware.
Paul Jones, head of product management at QuIC, said: "Working with Solum will enable QuIC to extend our lead in CVA calculation and further help our clients develop an integrated view of market and credit risk. With the faster speed we now offer, even clients with the largest portfolios don't need to limit the number of CVA sensitivities they can run each day."
Vincent Dahinden, founder and CEO of Solum, said: "We are pleased to partner with QuIC to make the CVA process more accessible to financial institutions worldwide. The ability to efficiently incorporate CVA calculations is a critical component for firms committed to comprehensive portfolio risk management."
QuIC's CVA solution delivers flexible, near real-time pricing and incremental exposure, sensitivity analysis, stress testing and P&L attribution of large, complex portfolios. The solution covers equity, credit and interest rate derivatives, foreign exchange and commodities. Solum is a major capital markets consultancy specialising in risk management and t and CVA.