Companies that operate in more than one country are exposed to Foreign Exchange (FX) risk. However, the use of derivatives exposes a company to regulatory requirements that specify how its value is calculated.
FAS 157 and IFRS 7 require the incorporation of counterparty credit risk into fair value calculations. Many companies calculate credit exposure by simply bumping the underlying curve and measuring the differences in fair value between the original and bumped curves. This practice has been acceptable to auditors to date, but it is anticipated that more stringent regulations and an increased focus on transparency will make this practice unacceptable in the future.
“We added CVA calculations on FX Forwards to Fair Value Insight to provide an easy-to-use, affordable option to comply with the coming regulations for our customers.” Said Bob Park, president and ceo, FINCAD, “It’s a complete solution, with credit risk adjusted fair values and market risk numbers for the most commonly used instruments – all designed with the ability to have automatically generated reports.”
Fair Value Insight is a Software-as-a-Service (SaaS) derivatives valuation solution built using FINCAD’s industry standard analytics and ICAP’s unrivalled market data. Fair Value Insight is a cost effective solution for pricing and risk management of OTC derivatives and fixed income securities. Sensitivity analysis can be performed on instruments and portfolios, and detail and summary level reports can be generated on demand or scheduled to run at pre-determined dates.
