In this video blog Dennis Sadak, Vice President in the Numerix Client Solutions Group breaks down today’s XVA challenge. Dennis speaks with Jim Jockle, CMO about how these costs and trade pricing adjustments are being incorporated into the valuation process, impacting trading decisions and derivatives trade processing.
Dennis stresses the importance of real-time, pre-trade analytics that are capable of modelling all these costs through time to determine how the trade will behave, and how profitable it will be into the future. Dennis also explains the compute complexity of these calculations and the use of cloud technology to manage cost.
Jim Jockle (Host): Hi welcome to Numerix Video Blog. I’m your host Jim Jockle. Joining me today, Vice President in the Client Solutions Group, Dennis Sadak, Dennis welcome.
Dennis Sadak (Guest): Hi Jim.
Jockle: I want to harken back over to about a year ago when we started seeing changes in market infrastructure, especially around the concepts of CVA, and DVA. And that has completely blown out into what is now being branded as XVA’s. We have TVA, and all kinds of new valuation adjustments opposing derivatives and the valuation process. But the debate still continues. I think we’ve hit some hurdles in terms of standardization around some of these concepts, but where I really want to get with you is where is the debate today as it relates to the implementation and really almost the total cost of ownership of incorporating XVA into your valuation process.