XVA Solution of the Year: Murex

For the third consecutive year, Murex has won the Asia Risk Awards’ XVA solution of the year. Murex’s MXThe .3 management platform has once again provided one of the most accurate and cost effective solutions in the industry XVA calculations – something the market desperately needs.

As credit and funding spreads have widened due to the outbreak of Covid-19 and the war in Ukraine, the costs of credit valuation and funding valuation adjustment have increased. Meanwhile, fluctuations in market volatility have affected exposures at default, increasing the cost of capital for counterparty credit risk. XVA describes a family of derivative valuation adjustments after accounting for funding, credit risk and regulatory capital costs. Concessionaires generally incorporate the costs associated with XVAs in the price of a new trade.

As a result, traders need to rebalance hedges with increasing frequency as markets evolve and client demands for novating, restructuring existing positions, and pricing new types of trades increase. This is where Murex’s solution helps customers keep their operating costs under control, as banks need to calculate XVAs in real time and at scale using complex analytics.

When asked what differentiates his XVA solution from other publishers, the French software publisher is proud of its consistency, from pricing to risk management and finance. Its solution is natively embedded with all the MX.3 multi-asset platform services, and accesses all trade, market and counterparty data already in the system.

Corrections and reruns can be managed seamlessly within the platform, and no data interpretation and mapping is required, providing consistent position modeling, representation and management, XVAs and hedging throughout the calculation chain.

This contrasts sharply with the autonomy of some providers XVA systems, which require cumbersome and costly integration with banks’ trading platforms or double-booking of trades. The resulting data and model discrepancies between the front office and XVA calculations often lead to valuation errors and inaccurate coverages.

Murex does not say anything else XVA on the market provides a fully integrated solution that offers sellers and traders a single tool to assess, account for and manage the risks of their OTC derivatives with consistent calculations XVA price adjustments.

MX.3 recessed XVA pricing and transferring fees into the day-to-day tools of sales and merchants, giving them the autonomy to set the price and negotiate transactions with their customers instantly without waiting for the XVA office to price offers.

Murex customers appreciate the service. A leader of XVA quants from an Australian bank said their bank chose Murex’s platform because it allows XVA office to focus on more complex transactions and manage book risk. “Providing 24/7 pricing capability puts the sales staff back in control and eliminates the need for vanilla XVA prices should be channeled through the XVA office,” he said.

Providing 24/7 pricing capability puts sales staff back in control and eliminates the need for vanilla XVA prices should be channeled through the XVA desk

Boss of XVA quants in an australian bank

The XVA The Pricer tool enables proactive intraday monitoring and dynamic hedging, which means traders run complex pre-trade simulation analysis and calculate in real time XVA costs and sensitivities.

The XVA Pricer has rolled out its latest extension to make it easier XVA pre-negotiation hedging by integrating XVA sensitivities. Murex says this capability is now available to customers in Asia Pacific, where there is continued interest given current market conditions.

Murex’s XVA Other solution differentiators include its extensive and expandable product coverage. It supports customers’ exclusive products and models, providing a XVA user gain language in Python for scripting gain definitions so they can be evaluated in the XVA frame.

Native integration between the front office and risk engines also dramatically improves time to market for new products and analytics. For example, Murex was able to seamlessly deploy system adaptations for new risk-free rate gains across the value chain as more market participants transitioned to a new suite of risk-free rates. Libor reference.

Although already a market leader in the space, Murex has continued to make valuable investments in cutting-edge technology for an evolving ecosystem.

He understands that XVA requires enormous computing power to produce accurate results in real time and in batch mode, so he developed a patented programming framework specifically for XVAand provided optimal, vertical scalability on CPU and GPUs grids. (GPUsor graphics processing unit, is a specialized processing unit with enhanced mathematical computing capability, ideal for computer graphics and machine learning tasks.)

On that note, Murex is exploring machine learning models to XVA as his team tested the use of neural networks in pricing and benchmarking, including replicating the differential machine learning approach on Exotics. He is currently analyzing whether the approaches can be applied to a wider range of portfolios.

In addition, MX.3 has successfully deployed its compute engines on the cloud, providing customers with pay-as-you-go access.

The new cloud-based managed services, PBaaS, has significantly lowered entry barriers for small banks. It requires minimal setup and no additional infrastructure, leveling the playing field when it comes to commercial pricing and XVA cost management.

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