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Course Calendar Course CalendarXVA Modelling and Computation
This advanced three-day course gives attendees the tools to understand, implement and manage XVA’s.
The programme starts by describing pricing under CSA and multicurve; followed by building a modelling framework for implementing an efficient XVA platform. It covers CVA/DVA, Funding and Capital adjustments - from modelling and regulatory aspects to accounting choices, through to market best-practice and cutting-edge issues - with both detailed break-down and global aggregation.
Sections are devoted to Initial Margin, Collateral Currency options and other adjustments and mitigations. It concludes by describing hedging under both a strategic and an implementation point of view.
Recommend to a Colleague- Date:
- Please contact us
- Venue:
- Central London
- Fee:
- Quants/ Financial Engineers
- Traders, Risk Managers
- Structurers
- Sales People
- Strategists, Researchers
The course is also suitable for Regulators and Academics who want to get real knowledge of market practice and modelling issues in the field of XVAs.
- The foundations of derivatives pricing
- Basic statistics and numerical methods (Monte Carlo)
- A basic understanding of Counterparty Risk and xVA's (covered in The XVA Challenge programme)
Dr Massimo Morini is currently Head of Interest Rates, Credit and Inflation Models at Banca IMI Intesa Sanpaolo (where he is also responsible for coordinating Model Research). Dr Morini is a Professor of fixed income at Bocconi University and was Research Fellow at Cass Business School of London City University. He holds a PhD in Mathematics and a MSc in Economics.
Dr Morini regularly delivers advanced training on credit modelling, interest rate market models, correlation modelling and model risk. Over the past years he has led workshops on financial modelling and the credit crunch in the main international finance conferences. His papers appeared on journals including Risk Magazine, Mathematical Finance, the Journal of Derivatives and Applied Mathematical Finance.
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a Brochure with full details for XVA Modelling and Computation
Modelling and Implementation for XVA's
- The way XVA’s are restructuring banks
- The nature of XVA’s. Netting-sets, entity specific computations, non-market parameters and hybrid hedging
- Choosing the modelling framework
The base CSA Price
- The value of collateral and OIS discounting
- The mathematics of collateral
- Negative rates and Multicurve in an XVA framework
Modelling framework for XVA
- Credit Reduced-Form Models with default intensity from flat to time dependent to stochastic. The possible addition of Jumps
- Hybrid modelling for Rates, FX, Commodities, Equity and inflation modelling
- Wrong Way Risk and Correlated Counterparties: Multi-factor Models, PCA, Copulas, Joint Jumps
- Structural Models for Ratings and Spread
- Model Risk and Model Validation issues. Level 1, 2 and 3
Implementing CVA
- The mathematics of CVA (and DVA)
- Master Formula
Practical Examples
- Rates and Cross-currency CVA with analytics and via simulation
- Equity CVA with intensity and with structural models
- FX, Commodity and Wrong Way Risk
Computational efficiency
- Default simulation vs exposure computation
- Full repricing vs American Monte Carlo. Technical issues and how to solve them
- Working on hardware: parallel computing, grids and GPU’s
Practical Example: Simulation fox hybrid XVA's, issues and solutions
DVA, Funding, Capital with KVA, Aggregation and Accounting DVA
- The Closeout Puzzle
- DVA as Funding Benefit
Interactions between DVA and FVA FVA
- The mathematics of funding
- The basics: valuating Collateral and Funding through discounting
- The impact of NSFR
- The interactions with Credit Risk
- Formalizing the funding strategy. Funding as replication
- The FVA debate. HW point and practical and theoretical confutation
- Implementing Funding in simulation or loan-equivalent exposures
- The optimal Funding adjustment. Market Consensus and Funding nature for competitive charge
Interactions between FVA and KVA KVA: from Regulatory Exposures to Cost of Capital
- Computing Regulatory Capital Requirements
- Modelling under the Real World measure vs Risk-Adjusted Pricing
- KVA implementation: american and joint measure simulation
- Capital against Credit risk vs charging CVA – Two insurance strategies
- Cost of Capital
Interactions between KVA and CVA
Practical Example: aggregation without double counting
XVA Organization and Accounting
- CVA and DVA in IFRS 13. Prudent Valuation, AVAs and the choice between Fair Value and Capital. Perspectives for KVA
- FVA accounting. The approach of Albanese and Andersen. The approach of Hull and White. Variations and Examples
- EVA and other KPI. Measuring the profitability of the Derivatives Business
Practical Example: Organization, Transfer Pricing, Practical XVA Desk Interaction
Sensitivities and Hedging, Initial Margin and Collateral Options
Initial Margin Value Adjustment
- CCPs, ISDA SIMM and Bilateral Initial Margin
- Full revaluation vs Delta-gamma approximations
- Path-wise Montecarlo for the IM component of FVA
- Detecting the impact of IM in prices
Practical Example: Efficient Implementation
Other mitigations of XVA risk
- Netting and Set-off agreements
- Break-up Clauses
- Possible future: Tranching CVA and Margin Lending
- Possible future: Distributed Ledgers for efficient settlement, collateral closeout
Collateral Options
- CCS pricing and the cross-currency basis
- The mathematics of collateral currency
- The value of switching collateral currency
- The value of bond vs cash collateral
Hedging Strategies
- CVA Hedging in reality
- Different rehedging frequencies and protection of exposures
- Making use of correlations for effective hedging
- Hedging or transferring DVA
Efficient Sensitivities
- Making greeks efficient: pathwise and adjoint differentiation
- Adjoint sensitivities with credit simulation and with exposures
- Adjoint sensitivities with bootstrap and calibration
Practical Example: Hedging and Adjoint Geometry
A great course to get an understanding of xVA beyond the usual CVA knowledge.
(Quantitative Research Analyst - ING Bank)
Course Details
- Date:
- Please contact us
- Venue:
- Central London
- Duration:
- Please contact us
- Fee: Please contact us

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