Numerix CVA

Regulatory compliance, including BASEL III

CVA trading & hedging
Incremental/marginal CVA, DVA & FVA
Real-time for individual counterparties
Intraday CVA batch
Industry leading model & trade coverage,
including full hybrid modeling

#1
Risk Management -
Market & Credit
#1 in CVA
NUMERIX CVA
Whether seeking to meet Basel II and III or other regulatory requirements,
hedging or actively trading your CVA positionsNumerix provides the award
winning, cross-asset CVA analytics you need to manage your counterparty risk
across the institution, giving users the ability to calculate, analyze and limit
exposures across business units and optimize capital allocation reduction
through Basel III compliance, with fast and accurate CE, PFE, CVA, FVA and DVA
calculations, using an accelerated Monte Carlo simulation engine.

DATA PFE ENGINE CALIBRATION WRONG-WAY RISK PRE-DEAL IMPACT SENSITIVITIES FOR HEDGING
In choosing Numerix CVA, we received the best
performing methods for each instrument category
and a reliable, exible CVA solution, that above all
else was easy to use.
Head of Risk Methods & Valuation, pbb Deutsche
Pfandbriefbank

DATA PFE ENGINE CALIBRATION WRONG-WAY RISK PRE-DEAL IMPACT SENSITIVITIES FOR HEDGING
Key Features
Unilateral or bilateral CVA with deal price, deal aging, collateral posting and netting agreements
Stress testing and drill-down based on business unit, instrument type, desk, position,
maturity bucket or custom factors
Easily integrate new trade types, including exotics
Incremental CVA & PFE in real-time
Intra-day CVA & PFE calculations for large portfolios
Consistent model calibration for both market scenarios and deal prices
Import trade, market and reference data from multiple trading and risk systems
Fast American Monte Carlo engine for complex derivatives
Trade upload from all leading lifecycle management & trading systems
USER INTERFACE
NUMERIX CVA WORKFLOW
Trade Data
Market Data
Reference
Data
Market-Evolution
Model
Pricing Model
Deal-Aging Model
Counterparty-
Default Model
Wrong Way
Risk Model
Data
Cleansing
&
Normalizing
Netting
Agreements
Collateral
Agreements
(CSA)
Wrong Way Risk
Assumptions
+
+
DVA
CVA
CE
PFE
FVA
When it comes to Enterprise Risk Management,
Numerix topped the credit value adjustment
(CVA) category in the risk management section.
Risk December 2011, #1 CVA Winner Risk
Technology Rankings

SIMULATION METHODOLOGY
PFE Engine
Leveraging the power of Numerix CrossAsset analytics,
Numerix CVA aggregates several algorithms to
generate potential future exposure at all levels
of trade hierarchy, from counterparty and portfolio
to individual trade level:
Pricing Model: Determines how deal prices are
calculated in the simulation: fast analytical models
can be used for linear and vanilla deals, while complex
deals can utilize the advanced term-structure model.
Market Evolution Model: Generates simulation
paths and derived market data. By using the same
calibration as the pricing model, calculated CVA is
consistent with the price of the instruments embedded
credit risk.
Deal Aging Model: Calculates exposure for complex
instruments with embedded options that, if exercised,
can signicantly alter the risk prole. For example,
a deal may include an option that may be exercised
if the prevailing interest rate rises above a certain level.
The model incorporates this potential change into
exposure calculations by simulating the market data
associated with the exercise event.
CVA Engine
Numerix CVA integrates the output of PFE Engine
with counterparty default data to generate CVA
and regulatory reports.
Netting Agreements: Denes how credit exposures
from multiple deals with the same legal entity are
offset against each other.
Collateral Agreements (CSA): Species the treatment
of collateral, including threshold and posting
delay, enabling potential-exposure calculations on
a collateralized or uncollateralized basis.
Counterparty Default Model: Denes how default
events are simulated, using either a default/
no-default assumption or a rating-transition model.
Wrong Way Risk Model Assumptions: Describes
the relationship between default events and
the counterpartys exposure (either uncorrelated
or wrong-way correlated).

RUN INTRADAY CVA WITH AMERICAN MONTE CARLO
The American Monte Carlo is the most effective calculation
approach for computing CVA of nonlinear instruments.
For most instrument types, it can calculate the entire
exposure surface (exposure distributions on multiple
observation dates) at once.
It is the only computationally effective method for
exotic instruments, and the most effective method for
non-linear vanilla instruments. In batch mode, Numerix
CVA achieves orders of magnitude higher performance
compared to valuation of the same portfolio, by computing
multiple instruments together. In detailed mode, where
each instrument must be calculated independently, the
calculation time of CVA is similar to that of valuation.
Numerix is one of the pioneers of American Monte Carlo,
having independently developed an optimized version
of American Monte Carlo for cross currency derivatives
valuation in 1997, which we called generic tree
(Mechkov, Linde, Sokol 1997). This method has undergone
extensive customer testing and peer review over the
past 14 years, and is used by most of our 700+ customers
across all of our valuation and risk products.
The American Monte Carlo: This highly
efcient model uses the same set of paths
for both market scenarios and prices,
eliminating the need for a Monte Carlo-on-
Monte Carlo computation, making intraday
CVA computations possible.
Interoperability with Numerix CrossAsset Excel
Any deal in Numerix CVA can be exported into self-contained Numerix XML les that
capture all calculation inputs including reference, market, calibration, and trade data.
Once converted to XML, the deal can be re-imported into Numerix CrossAsset Excel
for additional analysis and validation.
With the high performance Numerix CVA Monte
Carlo engine, real-time calculation of CVA per
counterparty for the entire rm will be possible.
Head of Risk Methods & Valuation, pbb Deutsche
Pfandbriefbank

LEVERAGING THE POWER OF NUMERIX CROSSASSET
The Numerix Hybrid Model Framework:
Unifying All Asset Classes
Select desired models based on underlyings, and
use them as building blocks for the hybrid model:
Our joint calibration process provides more accurate
calibrations of the entire option set by taking into account
the effects of model components.
#1 in CVA
Copyright 2012 Numerix LLC. All rights reserved. Numerix, the Numerix logo, and CrossAsset are either registered trademarks, or trademarks, of Numerix LLC in the United States and/or other countries.
Leading the Industry in Advanced Models and Methods
The Numerix CrossAsset library offers the industrys
most comprehensive collection of models and methods,
allowing institutions to price any conceivable instrument
using the most advanced calculations, in addition to
a wide range of calibration options for generating
market-consistent valuations. With an innitely exible
architecture for dening bespoke dealsand the ability
to integrate your own internal modelsNumerix allows
you to deploy a unied pricing and risk solution for all
your OTC positions across all trade types.
CrossAsset Coverage & Full Transparency
Clients have access to models for all asset classes,
including: xed income, ination, credit, equity, FX,
commodities and hybridsalong with full transparency
into model assumptions and numerical methods.
Advanced Modeling for Hybrids
Our unique hybrid model framework enables the
production of consistent scenarios among multiple
risk factors, which is critical to producing robust
CVA calculations. The framework produces accurate
valuations for instruments consisting of multiple
underlyingstaking into account correlation among asset
classes. It allows you to select the best model for each
component of a hybrid deal, and then dene correlations
between equities, yield curves, credit curves, currency
pairs and FX rates. The joint calibration process we
provide results in more accurate calibrations of the
entire option set by taking into account the effects of
model components during calibration.

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