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Introduction

With a career spanning several prestigious institutions, I have accumulated a wealth of experience and expertise that can be of significant value to your organization. I invite you to explore my journey and accomplishments in various roles across the financial industry.

During my tenure at JPMorgan, I led a transformative initiative within the Clearing and F&O business. By introducing front-office risk-management and pricing discipline to this previously considered "agency" business, I successfully revamped the risk and capital infrastructure. This endeavor resulted in doubling the revenue of the Clearing business while reducing the capital, GSIB, and residual interest footprint. Notably, my team's contributions led JPMorgan to win the Risk award for best OTC Client Clearer in 2019 and 2021.

Prior to that, I played a pivotal role in implementing funding adjustments (FVA) and lifetime cost of capital (KVA) for the derivative franchise globally, which had a substantial impact on the firm's performance. Furthermore, I spearheaded the introduction of single and multi-currency OIS discounting for collateralized derivatives, establishing a centralized firm-wide utility for managing funding risks across all lines of business and regions.

XVA

1. Collateral optimisation/CSA renegotiation/Differential Discounting (DD) recognition

The idea of capturing value in trades through recognition of different eligible assets (i.e. initially the issue of moving from Libor to OIS discounting, but also extending to other assets in the CSA) has been well known since around 2009-10 (when GS reputedly made the majority of their FICC revenue optimising for this). Most dealers have updated their systems to avoid this arbitrage in their bilateral business (crystallizing considerable costs for the late movers). 

However, this concept is not completely efficiently captured in every aspect of the market, for example where the trades are “given-in” under a Clearing Agreement. That market is a post trade approval market and essentially DD-agnostic and hence it is still open to arbitrage.  Specifically, when a client goes to market, the Executing Broker (EB) prices the trade according to their DD curve facing the Clearing Agent. These can be different from different EBs, and is not the same curve as the DD curve the Clearing Agent has with the client. So, in effect, the trade is priced on the “wrong” discount (DD) curve and a client could potentially identify backwardation opportunities particularly for trades with large funding deltas.  

2. CVA mining and IM optimisation – XVA Hub

Should a corporate or hedge fund have any uncollateralised risk, a Central Hub function could help mine bank’s CVA reserves where there are offsetting risk and or credit deltas across counterparties.

Similar to CVA mining, moving trades between counterparties can optimise the availability of the $50m threshold under the Non-Cleared Margin Rules (NCMR), reducing total IM funding needs.   For example, if their cost of debt is 5%, adding 5 dealers and optimising for threshold could save 5*$50m*5% = 12.5m per annum

Another specific variant of the IM optimisation idea is to convert Cleared IR delta into uncleared put and call swaptions, where the IM can be bilaterally negotiated and offset bilateral risk. In essence, it can result in free funding.  

A large hedge fund, recently set up a Central Hub to manage the relationships and XVAs with all their dealers, to prevent unnecessary credit costs/exposures and to minimise margin funding costs.

Consulting Services in CVA and XVA: Issues and Offerings

As a highly accomplished derivatives risk manager with extensive experience spanning trading, marketing, and risk management at JPMorgan, your expertise uniquely positions your consulting firm to offer comprehensive services in the field of Counterparty Value Adjustment (CVA) and XVA (X-Value Adjustments). Drawing from your vast experience, your consulting firm can address a multitude of critical issues and provide valuable insights to clients in the financial industry. Here's a detailed exploration of the issues and offerings your consulting service may provide:

CVA and XVA Methodologies and Implementations:

• Offer guidance on implementing and enhancing CVA and XVA methodologies, leveraging your experience in pioneering CVA trading and defining philosophies for derivative counterparty risk management.
• Provide expertise in designing and implementing systems for comprehensive XVA calculations, including CVA, DVA (Debit Value Adjustment), FVA (Funding Value Adjustment), and others.

Market and Regulatory Developments:

• Stay abreast of evolving regulatory frameworks related to counterparty risk, including Basel III and IV, ISDA SIMM (Standard Initial Margin Model), and other regulatory changes impacting derivatives trading and risk management.
• Offer insights into regulatory changes affecting non-cleared margin requirements, capital metrics (e.g., SLR, LCR, NSFR), and their implications on derivatives pricing and risk management.

Risk Management and Optimization:

• Provide guidance on optimizing counterparty risk management strategies, incorporating differential discounting and collateral funding optimization techniques pioneered during your tenure.
• Assist clients in developing comprehensive risk management frameworks to mitigate credit, funding, and capital risks across the entire derivatives portfolio.

Product Structuring and Pricing:

• Offer expertise in structuring complex derivative products tailored to clients' specific risk profiles and investment objectives.
• Provide pricing analytics and model validation services for structured products, drawing from your experience in executing derivative transactions for structured finance businesses.

Client Clearing and Margin Optimization:

• Assist clients in optimizing client clearing operations and margin requirements to enhance profitability while maintaining risk discipline.
• Provide guidance on establishing market risk-aware pricing frameworks for client clearing services, based on your experience leading the implementation of FVA (Funding Valuation Adjustment) and KVA (Capital Valuation Adjustment).

Technology and Infrastructure Enhancement:

• Offer guidance on technology and infrastructure enhancements necessary to support advanced risk management and pricing analytics, leveraging your experience in technology and infrastructure change management.
• Assist clients in implementing cutting-edge risk management systems and tools to streamline operations and enhance decision-making processes.

Industry Engagement and Thought Leadership:

• Provide thought leadership and industry insights through participation in industry forums, conferences, and regulatory initiatives.
• Offer bespoke training and educational programs to disseminate best practices in CVA and XVA methodologies and risk management techniques.

Client-specific Solutions and Advisory:

• Tailor consulting services to meet the unique needs and challenges of individual clients, spanning investment banks, asset managers, hedge funds, and other financial institutions.
• Offer bespoke advisory services to address specific client concerns, such as optimizing derivative trading strategies, managing counterparty exposures, and enhancing regulatory compliance.

In summary, your consulting firm's offerings would encompass a broad spectrum of services, ranging from methodological expertise in CVA and XVA calculations to strategic advisory on risk management, regulatory compliance, and technology enhancements. Leveraging your extensive experience and thought leadership in derivatives risk management, your firm is well-positioned to provide invaluable guidance and solutions to clients navigating the complexities of counterparty risk in derivatives trading.