Aite Group’s latest report finds that banks are turning to third-party XVA providers for more robust solutions.
For years, the primary and often stand-alone use of X-valuation adjustments centered around fair value accounting requirements. But this has changed as XVA desks, most prominent in large Tier-1 banks, start to proliferate across lower-tier banks. With regulatory complexity and banks’ goal of producing the most accurate pricing for a derivatives deal driving wider use, is the golden age of XVA upon us? Aite Group’s new report, XVA Vendor Solutions: The Golden Age, explores the trends that are driving sales as well as challenges to the space.
“This is no longer your mother’s XVA,” states Audrey Blater, Ph.D., senior analyst at Aite Group. “Growth in the adoption of the XVA family of valuation adjustments has moved the needle from basic accounting requirements to active pricing of various other valuations that take into account funding costs and regulatory capital impacts,” she explains.
This report focuses on the various solutions and functionality offered by the risk vendor community in response to the evolution of XVAs, and it profiles 10 vendors: Bloomberg, Calypso Technology, Finastra, FIS, IBM, IHS Markit, Murex, Numerix, Quantifi, and TriOptima. It is based on conversations with 10 providers of third-party XVA solutions between September 2018 and March 2019 as well as interviews with 15 Tier-2 and Tier-3 regional and global banks that were conducted between August 2018 and February 2019.