Risk.net and Numerix: Exploring MVA & Initial Margin
On 11/7 featured speakers Philip Harding, Contributing Editor for Risk.net and Dr. Andrew McClelland, Director of Quantitative Research at Numerix, explored the rise of MVA and the impacts of expanding IM requirements. In this webinar they identify how IM requirements arise from client trades and the hedge trades they necessitate, with the aim of accurately determining the total MVA impact of the trade to the bank.
In its latest margin survey, ISDA reported that Initial Margin (IM) collected by the top 20 firms increased by 22% to $130.6 billion at the end of 2017.
IM requirements are impactful, owing to the associated funding costs. This is the role of Margin Valuation Adjustment (MVA), which represents the cost of funding IM requirements over the life of a trade, or of a portfolio.
Up until now the focus of MVA has been primarily on the client trade. However, from a bank perspective, servicing clients can require posting IM for client trades, and for their hedges.
On November 7th, Risk.net Contributing Editor, Philip Harding and Numerix Director of Quantitative Research, Andrew McClelland, Ph.D., explored these concepts, identifying how IM requirements arise from client trades and the hedge trades they necessitate, with the aim of accurately determining the total MVA impact of the trade to the bank.
The Webinar Covered the Following Topics:
- Basic definitions and background for CCR, VM, MPoR (Margin Period of Risk), IM and MVA Valuation Adjustment
- Structure of an MVA calculation and forecasting sensitivities for IM
- IM for dynamic hedges: forecasting hedge ratios and hedge-side IM
- Worked example for a Bermudan hedged by vanilla swaps and swaptions
- When, and how much, hedge-side IM to charge on to clients
Attendance is complimentary, Registration is required. Space is limited, reserve your seat today!
Moderator:
Philip Harding, Contributing Editor, Risk.net
Mr. Harding recently joined Risk.net to lead the development of content and thought leadership programmes and initiatives working with specialist brands as part of the marketing solutions team. An experienced financial and B2B publisher and editor, he has worked with leading brands across sectors covering risk management, insurance, pensions, investments and banking.
Featured Speakers
Andrew McClelland, Ph.D.
Andrew McClelland’s quantitative research at Numerix focuses on XVA pricing and hedging, generating counterparty credit risk metrics for structured products, and estimating risk model parameters via time-series estimation. He earned his PhD in finance at the Queensland University of Technology for a thesis on financial econometrics. He considered markets exhibiting crash feedback, option pricing for such markets, and parameter estimation for such markets using particle filtering methods. Dr. McClelland’s work has been published in the Journal of Banking and Finance, the Journal of Econometrics, and the Journal of Business and Economic Statistics.
