Quaternion Risk Management Limited (Quaternion), provider of specialized risk analytic consultancy, services and software are now working together with UBS Delta, the award-winning provider of risk and performance analytics to provide counterparty exposure, CVA/DVA analytics and reporting services to the financial and corporate community.
Quaternion's risk engine and complex analytics have been integrated into UBS Delta to provide the CVA Service.
"We have first hand experience of a wide variety of CVA implementations which are in live operation in a number of jurisdictions, and are delighted to have the opportunity of making "big bank" CVA capabilities readily available to the UBS Delta customer base in a user-friendly offering," said Donal Gallagher, Managing Director, for Quaternion; "Requirements which are complex to implement – such as CSA details, and flexible trade and netting set reporting – are all taken care of."
"Our core clients – asset managers, insurers, corporates and pensions schemes - have historically not required counterparty exposure profiles or CVA/DVA analytics" said Dermot Shortt, Global Head of UBS Delta. "They now face increasing requirements of regulators and accounting standards (such as IFRS 13) and we are excited to have extended our core risk offering to include calculation of such analytics, through this new partnership with Quaternion, who have significant experience and trackrecord in this area. Our clients are already uploading their OTC derivatives onto our platform, and with the additional upload of netting set / CSA details they will be able to make use of this additional analytic suite."
Derivative portfolios, whether collateralised or not, contain embedded counterparty risk. The Credit Valuation Adjustment (CVA) and its counterpart Debit Valuation Adjustment (DVA) are the market price of the embedded credit risk in a derivative portfolio. In addition to Balance Sheet and Risk Management applications, CVA and DVA are required under banking regulations (Basel III) and, since January 2013, international accounting standards (IFRS 13). Any company reporting accounts under IFRS is required to account for CVA/DVA for reporting periods starting
after January 2013. CVA and DVA pricing has become a mainstream valuation challenge and is no longer confined to large and sophisticated financial institutions.