TriOptima has launched triQuantify, a counterparty credit risk analytics service, intended to help institutions with over-the-counter derivative portfolios to meet both broad and specific risk modeling requirements.

The service will be integrated with triResolve, TriOptima’s counterparty exposure management service where 90% of all collateralized OTC derivatives globally are reconciled on a daily basis.

TriOptima, an Icap Group company, is a provider of OTC derivatives post-trade risk management services including triResolve, triReduce and the recently-launched triBalance.

TriOptima has licensed Global Valuation Ltd’s (GVL) software to power the new service.

“The GVL software takes advantage of the advances made in the computer gaming/animation industries which allow for massively parallel computing devices to simultaneously process large amounts of data,” said Per Sjoberg, chief executive of TriOptima.

In a report last week by the Basel Committee on Banking Supervision, concerns were raised about consistency in the way that risk-weighted assets were calculated across the industry, resulting in very different capital allocations.

“This new way of calculating risk across a portfolio would address some of those concerns,” said Sjoberg.

In order to value and hedge counterparty risk, large portfolios of data need to be analyzed simultaneously with consistent parameters.

“triQuantify can be applied to validating and benchmarking existing risk calculations or as an outsourced risk service,” said Sjoberg. “It can cover initial margin calculations for bilateral trades as well as CVA [credit value adjustment], PFE [potential future exposure] and funding value adjustment calculations.”

There is currently a strong market focus on counterparty credit risk and more specifically on CVA, according to risk analytics firm Quantifi.

The attention is predominantly towards the issue of efficient CVA pricing as opposed to implications in terms of risk management and capital requirements, the company said in a white paper it published with advisory firm Risk Dynamics.

“In the current regulatory environment, to correctly assess capital charges owing to counterparty credit risk, it is important to consistently combine both risk-weighted assets of Basel II and CVA VaR [value at risk] Basel III capital,” said Dmitry Pugachevsky, director of research at Quantifi.

It is only since 2007 and the financial crisis that most institutions have had a strategy to actively manage their CVA positions by creating CVA desks specializing in hedging, valuation and pre-trade pricing, according to the white paper.

“The approval of internal models and processes allows banks to adopt the advanced methods which are designed to provide greater capital relief,” said Pugachevsky.

TriOptima plans to get its risk models and processes approved for regulatory capital calculation of counterparty credit risk.

triQuantify will also provide initial margin calculations for bilateral trades, proposed by the Basel committee and Iosco, the international securities regulators’ body. Parties using such a centralized service will avoid the potential for disputes if each party made its own calculation.

GVL will set up a service that will calibrate the models based on market data supplied by Icap Information Services. The calibrated model parameters will be used by TriOptima and made available to clients on a subscription basis.