Galen Stops examines the "big data" problems associated with CVA calculation and argues that cloud computing could help firms cope with them.
FOW recently looked at some of the complexities facing
banks as they attempt to calculate their Credit Value
Adjustment (CVA) capital charges under the Basel III regulatory
However, it is not just the calculation itself that is
difficult. Building the infrastructure that is needed to
support this calculation brings its own challenges.
The success of a desk that manages a bank's CVA charges is
heavily influenced by a number of complex IT issues such as
aggregating counterparty exposure across different front office
systems, normalising and comparing risk figures and addressing
infrastructure demands imposed by CVA.
Doing CVA calculation for just one counterparty with 1,000
trades - which is a relatively small amount for a large bank -
requires the bank to simulate trades up to maturity for
thousands of Monte Carlo scenarios at multiple time steps into
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