The two hot topics of credit risk: xVA and SA-CCR

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Real world Quantitative Risk Software solutions

Risk management

On this page you will find applications that calculate all the credit risk valuation adjustments (including CVA, DVA, FVA, MVA and KVA) and the exposure-at-default according to SA-CCR, the Basel's commitee latest standardized approach. Yes, both are open source.

Quantitative analysis

We also offer consulting services focused on quantitative analysis/development.

Adjustable

If an existing implementation does not cover your needs 100%, we can extend it according to your specific requirements.

xVA

An open source implementation of the xVA world including CVA, DVA, FBA, FCA, MVA and KVA(under CEM, SA-CCR and IMM)

xVA groups as an acronym all the possible credit risk valuation adjustments currently suggested in the market. Starting from CVA which incorporates the default risk of the counterparty in the market price of the trade, the industry proceeded with DVA which is actually the CVA as seen from the counterparty’s point of view and it further continued adding terms, for example FVA which represents the benefit/cost of funding the MtM of a trade due to imperfect collateralization, the MVA which is linked to the initial margin which needs to be posted to the counterparty or the CCP and the KVA which is the effect of the regulatory capital that banks need to hold for this transaction. You can find further info about xVA in in the latest book of Jon Gregory: “the xVA Challenge”.

We have developed an implementation of this framework for the R platform. It is open source, licensed under the GPLv3 license. You can download its documentation here and find the package and its full source on github. Or you can download the project from the R pages. Or simply download it from R (it appears on the R Package list as xVA).

Some of the features of the application:

  • Calculates a number of valuation adjustments including CVA, DVA, FBA, FCA, MVA and KVA.
  • A two-way margin agreement has been implemented.
  • For the KVA calculation three regulatory frameworks are supported: CEM, SA-CCR and IMM.
  • The probability of default is implied through the credit spreads curve.
  • Currently, only IRSwaps are supported.

SA-CCR

An open source implementation of the Basel Committee's new SA-CCR recommendation.

SA-CCR is Basel Committee's new, improved proposed formulation for measuring exposure at default (EAD) for counterparty credit risk (CCR). The SA-CCR will replace both current non-internal models approaches, the Current Exposure Method (CEM) and the Standardised Method (SM). You can find an overview here.

We have developed an implementation of this framework for the R platform. It is open source, licensed under the GPLv3 license. You can download its documentation here and find the package and its full source on github. Or you can download the project from the R pages. Or simply download it from R (it appears on the R Package list as SACCR). Other than R, it has no dependencies whatsoever.

Some of the features of the application:

  • An object-oriented, inheritance-based framework for the representation of the trades has been created. Currently, trade types of all the five major asset classes have been created and, given the inheritance-based structure of the application, the addition of further trade types is straightforward.
  • The application automatically separates the trades on the corresponding hedging and netting sets.
  • All the examples appearing on the regulatory paper (including the margined and the un-margined workflow) have been implemented.

Support

We are here to help.

We can provide support for the current implementation. Contact us for more information.

We can also develop new solutions on demand, see the consultancy section for more information.

Consultancy

We can provide a wide range of consultancy services, on demand, including Quantitative Development services, Business Analysis services etc.

Quantitative Development

  • Implementing risk frameworks on various languages/platforms including R, Matlab, JAVA, Python etc.
  • Optimizing and redesigning existing code libraries so as to speed up the execution times and increase their maintainability.

Business Analysis

  • Identifying project drivers (either Basel Regulations or internal risk governance).
  • Gathering of user requirements and integration analysis on existing systems.
  • Educating the users on the new regulatory changes.

Contact Us

Get in touch if you are interested in or need help regarding any of our services, by filling the form below or sending us an email directly at info@openriskcalculator.com.