Markit, a leading, global financial information services company, today announced the launch of Markit Analytics CVA & Capital, a market-leading Basel III-compliant platform which integrates the management of credit valuation adjustment (CVA) and internal model capital.
At a time of regulatory change and rising cost of funding and capital, banks are increasingly adopting simulation-based risk management techniques which allow them to measure and manage financial resources with greater risk sensitivity. Under Basel III, banks that use both the Internal Model Approach (IMA) for market risk capital and the AIRB Internal Model Method (IMM) to calculate counterparty credit risk capital are required to use the advanced method known as CVA Value at Risk (VaR) to calculate the CVA capital charge.
By using the Markit Analytics CVA & Capital solution as a unified simulation engine to calculate CVA, funding valuation adjustment (FVA) and internal model capital for CVA, counterparty credit risk (CCR) and market risk, banks are able to meet regulatory requirements and enhance their active portfolio risk management capabilities while saving costs.
Paul Jones, Director, Markit Analytics, said: "Our proven core calculation engine combines trade level pricing accuracy with portfolio level simulation speed without having to resort to unwarranted approximations that make implementations costly and regulatory approval challenging. This new solution will cement our position in the industry as banks look increasingly for a vendor with a strong track record so they can allocate capital back to each product line effectively."
Markit Analytics CVA & Capital covers all asset classes from vanilla products to highly complex path-dependent derivatives. Capabilities include pre-trade inception charging, credit checking, post trade P&L and capital management. Markit Analytics' CVA solution was first implemented by a major financial institution in 2007 to dynamically hedge the CVA of a large multi-currency derivatives book on a batch and intraday basis.