<t>QuoteNon-compliant firms could face enforcement action or ultimately, be forced to hold additional capital should they pursue risky processes.Note the use of the word could. Also the use of the phrase should they pursue risky processes. If a firm implemented very good risk management then there i...

<r>In the UK we have SwapClear operated by LCH and in the US there is IDCG who perform a similar function. To quote from the SwapClear website:<URL url="http://www.lchclearnet.com/swaps/QuoteCredit">http://www.lchclearnet.com/swaps/QuoteCredit</URL> risk is reduced through the use of variation margi...

<t>You would need to re-balance the hedge, probably on a netted basis at the portfolio level at some time horizon that is set by the bank. Daily, weekly? Depends. How does a CVA desk generate PNL/revenues? Well go back a couple of years and it might have been a hard sell to say that we need a CVA de...

<t>So would you perform a daily reval or can you use a mapping table that approximates the results of the simulations so that traders can have some quick heuristics instead of relying on what may be a slow (in trading time) pricing process?Quantitative Analysis, Derivatives Modeling, and Trading Str...

Many thanks for the refs. Since CVA applies to ALL OTC products what about OTC options etc...

Gotcha - many thanks for the info.

<t>Going from a loan analogy, if I am of low credit rating then if I go into the market to get a loan then I have to cough up extra cash due to the higher interest rate that I will be charged compared to someone of a higher rating.With CVA and Swaps it looks like the higher credit rating has to coug...

So is it the case that for a vanilla IRS the counterparty does not trade the IRS with their credit rating affecting the swap rate. It is in CVA that the credit rating comes into the equation.

<t>Back on topic:Since IRS are priced off LIBOR curves ad LIBOR is the average of banks offer rates then LIBOR has an implied credit rating equal to the average of the banks in the LIBOR pool. Therefore, if one has a better rating than the banks in the LIBOR pool then you have a better rating than L...

On a slightly unrelated issue - in a XCCY swap is there a product like an NDF (Non-Deliverable Forward) that means that you do not have to give or take in the foreign ccy, i.e. one of the legs is denominated in, say MXN, but you want the cashflows to be in USD?

<t>You are both correct - the comment can be extended to cover private schoolboy antics as well.Away from the 'fun'; when creating a new product one has to be careful to not start gathering too many features but provide a bare bones product and apply extra features depending on the client's requirem...

<r>QuoteOriginally posted by: PaulI agree with your assessment of smart traders versus probability quants. But did you realise the significance of the "Fool" in the Tarot? It is the first card in the deck (with number "0") and signifies native cunning, often interpreted as "going where others fear t...

Hi all,Does anyone have a good insight into CVA and should we really be bothering about it in light of moves to SwapClear et al.Does anyone have some actual numbers for the cost of CVA on one swap?In practice is it only applied at the portfolio level?Regards

Yep, but it is in the off-topic forum <grin>....

Up-and-in barriers?