Efficient MVA via Dynamic SIMM Simulation by Ignacio Ruiz

Efficient MVA via Dynamic SIMM Simulation


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Presenter: Ignacio Ruiz, Founder & CEO of MoCaX Intelligence

The latest in our webinar series sees Ignacio Ruiz take us through 'Efficient MVA via Dynamic SIMM Simulation'

From September 2016 the financial industry is facing new regulation that is going to shape (again) the business of OTC derivatives: all tier-1 derivative dealers will have to post Initial Margin on their books of bilateral trades. From September 2020 nearly all financial institutions will have to comply. The Fed and ISDA have estimated the cost of this new framework in the many-billion zone.

In this webinar Ignacio Ruiz introduces the details of the new regulatory framework and presents computations of all XVAs (including MVA – the funding cost of Initial Margin) under different trading conditions for an illustrative interest rate swap and a swaption. He shows how the cost of trading is going back to the old uncollateralised levels with the new regulation. He also explains how MVA can have strong Wrong Way Risk and how not only the actual value of MVA will be very high but its volatility will be very strong too in stressed markets. Finally, he will explain how MVA can be calculated fast and accurately with the novel AGA (Algorithmic Greeks Acceleration) method.

Topics covered will include

  • The new economics of trading under Initial Margin
  • Impact in the industry and in the market
  • MVA vs. CVA, DVA, FVA, KVA
  • The operational and regulatory path
  • Dynamic SIMM simulation: how to do it fast and accurately
  • Example calculations: swaps and swaptions