The Transformative Impacts of the XVA State of Play

XVAs are playing an increasingly larger role in today’s market, in the sense that there is a greater adoption of more types of XVAs. The family of valuation adjustments, while vital in derivatives pricing, has also made derivatives trading more complex than ever. They are requiring enhanced governance and more powerful computational capabilities. They are also requiring a change in long-held market practices.

This white paper, based on a webinar discussion that included XVA experts from the Aite Group and Numerix, addresses key topics and questions regarding XVAs, such as:

• What is the current state of XVAs and the impact of regulatory requirements on them?
• The factors driving the growing role of XVAs in today’s market
• The different approaches market participants take to manage XVAs
• The core challenges linked to using XVAs
• The varying structures of XVA desks
• The new approaches to pre-trade pricing

The paper also reveals the some of the findings of an XVA study the Aite Group conducted based on conversations with heads or members of XVA trading desks, as well as with pricing and risk management functions at regional and global banks.