Breaking down XVAs
A sensitivity-based approach for trade-level allocations
In the post-crisis world, it has become a prevalent practise to include certain costs in the pricing of OTC derivatives that in many cases have previously been ignored, the so-called valuation adjustments or “XVAs”.
Model risk management
Building supervisory confidence
Models serve many important strategic purposes for financial services firms, and in many jurisdictions are relied upon in the regulatory framework. However, they can pose a number of risks for both financial services firms and the regulators monitoring them.