Accounting standards changes, Basel III and the development of industry best practices for risk management and valuations have caused a “hockey stick moment” for the development of credit valuation adjustment (CVA). Dan Travers, product manager for Adaptiv and CVA solutions at SunGard, explains that CVA is a fast evolving area and the last five years have seen the concept of risk adjusted pricing adapt to meet new industry requirements around derivatives transparency, and recent interest in the space from many corners of the industry has increased dramatically.
The International Swaps and Derivatives Association (ISDA) has raised its concerns about the representation of an entity’s financial position, solvency, and exposure to credit and liquidity risk in the proposals in the Financial Accounting Standards Board (FASB) and International Accounting Standards Board’s (IASB) recent exposure draft on the offsetting of financial assets and financial liabilities. In a letter to IASB chairman David Tweedie and the FASB’s director of technical application and implementation activities, Susan Cosper, ISDA indicates that it does not support the standards bodies’ chosen approach for achieving convergence in this particular area of accounting practices.
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Pricing Partners is meeting growing interest in unstructured products with valuation services for proprietary indexes created by banks to support investment in risky and non-risky assets, while making trading rules transparent to investors.
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