SA-CVA capital sensitivities with AAD
The capital run from over two days of grid time to about an hour
Reported by the client · SA-CVA, MAR50 · about 300 market-risk sensitivities · plus counterparty credit spreads · over two days to about an hour · AAD allowed by the MAR50 FAQ · tier-one bank
How AAD with XAD in a tier-one bank's own CVA code computed every MAR50 sensitivity: the capital run from over two days of grid time to about an hour.
A tier-one bank computes its CVA capital under the standardised approach, MAR50. That takes about 300 market-risk sensitivities: interest rates at five tenors in the main currencies and a parallel shift in the rest, plus inflation, then FX, credit, equity and commodity, each with vega, and on top the counterparty credit spreads. By bumping, one full revaluation per risk factor, the run took over two days of grid time and could not run overnight, before the trading day.
Xcelerit built AAD into the bank's own CVA code with XAD; the MAR50 FAQ allows AAD for these sensitivities. Every first-order sensitivity now costs about four valuations, validated against bumping, and the counterparty credit spreads come out of the same pass. The run takes about an hour of grid time instead of over two days, and fits overnight. The bank runs the code under an XAD Enterprise subscription.
- Challenge
- About 300 MAR50 sensitivities plus counterparty credit spreads; over two days of grid time by bumping
- What we did
- AAD enablement: XAD in the bank's own CVA code
- How it was checked
- Against the bank's bumped MAR50 run on the same grid and simulation; all sensitivities for about four valuations
Client-reported outcome. Exact figures are in the case study PDF, on request.
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