The Tao of CVA
The risks associated with Over-The-Counter (OTC) derivatives were a key contributing factor in the 2007/2008 global financial crisis. Since then, financial institutions have trained their risk management sights on Counterparty Credit Risk (CCR), i.e., the risk associated with a counterparty default before the end of an OTC contract.
A CCR measure that has attracted particular attention recently is Credit Valuation Adjustment (CVA). CVA is computationally complex and the Monte-Carlo simulations used require massive computing power. Banks are striving to quickly respond to these market and regulatory changes while maintaining the flexibility of using their own in-house software.
This video examines the implementation of CVA algorithms. Dongsheng Lu, Head of Quantitative research at BNY Mellon will give an introduction to CCR, explaining how CVA algorithms are typically implemented. He will also reveal how the increasing complexity consumes vast computing resources.
