About the Solution

Introduction

ActiveViam has undertaken an initiative to provide a solution for the minimum capital requirements for CVA risk as per Chapter MAR50 of the Consolidated Basel Framework Effective as of 01 Jan 2022¹. This is the result of regulatory monitoring, client consultations, and development work.

Synopsis

Here’s a short summary of features of Atoti CVA Risk Capital:

• Aggregation logic to compute CVA risk capital requirement in accordance with regulation:

  • Transparency of calculation is achieved by including interim calculations as measures in a pivot table (or tabular view) of the cube for validation/analysis purposes;

  • Measures can be drilled in to reveal hedges and netting sets contributing into the risk charge.

  • Multiple supervisory parameters sets can be supported for different jurisdictions.

  • BA-CVA vs SA-CVA: compare the results of the two methodologies side-by-side

• Pre-defined data model with the possibility to adapt to the bank’s own source formats.

• Possibility to have a pre-defined cube with all measures set in advance or let users dynamically select measures and instantiate them on-the-fly in the cubes (ActiveMeasures);

• Flexible set of attributes and dimensions (hierarchies, dimensions, levels of the cube structure);

• What-if simulations:

  • Override supervisory parameter values and re-aggregate capital numbers on the fly – in a so called “what-if” experimental branch.

  • Upload stress test sensitivities into a “what-if” branch and evaluate stress scenario impact

Synergies with other Solutions

Other Solutions in the ActiveViam products family share the same technology and similar data model, hence these synergies may be realized:

• Analysing CVA portfolio Greek-based PL and Value-at-Risk in the Market Risk Solution,

• Collecting comprehensive CVA portfolio market risk capital and sensitivities, by leveraging CVA Risk Capital cube with FRTB-TB cubes to see capital treatment of ineligible hedges (if any).

MAR50 exclusions

Some aspects of the MAR50 are not included in Atoti CVA Risk Capital. This section highlights those topics.

Atoti Server is not a risk engine

Atoti Server is not a risk engine. There is no functionality or software in Atoti CVA Risk Capital for the calculation of credit risk exposures and sensitivities. In all cases it is assumed that the client already has a risk engine or trade booking system that can generate the raw data (sensitivities, notionals, EAD, etc). Additionally, it is assumed that upstream systems are validating hedge eligibility.

Atoti Server is not a tool for data management

There is no functionality to convert bank’s static data into attributes, required by regulation, such as Sectors, Credit quality, relationship to counterparty, etc. The Solution expects to receive this meta-data as input.

Solution Concepts

Atoti Business Solutions are projects that contain business logic, implementation best practices and software code to enable a faster time-to-market and help clients confidently address use cases such as regulations. The reference implementations are built on and require Atoti Server, ActiveMonitor, and Atoti UI.

Clients may choose to use a Solution "as is" by conforming to published data input file structures and data stores. Alternatively, clients may use the Solution purely as a starting point for building a suitable system with additional functionality.

Source code is delivered and IT users are free to make derivative works (which become the client’s IP) to adapt to their data sources and requirements.