Objective

Set up the XVA Desk on high priority and get the associated internal models approved latest by end-2016.

CRISIL's Solution

• Quickly set up a short-term four-member team that performed a comprehensive review of all internally available material. Worked alongside model development and validation teams to scope out and delineate the model methodology for the documentation purpose
  
• Liaised with the BHC model risk committee to understand the expectations for the approval. Worked alongside model development and validation teams to deliver, coherent, high-quality model development and validation docs that meet BHC Model Risk Committee approval standards
  
• Delivered independent validation of one of the models (CDS Proxy model). Assisted in validation review of the other two models. Continuous support provided till completion of the internal approval process
  
• Currently working on bringing all deliverables to SR11-7 standards and securing final sign-offs from the BHC Model Risk Working Group
  

Challenges

• Three of the key models used for XVA Calculations (CDS Proxy model, CSA discounting model, and XVA Computation Engine) required internal approval by EoY 2016. High quality model development and validation documents were required to be submitted for each model, for internal approval
  
• Available material for model development and validation documents spread across multiple internal sources; model methodology was hence, not much transparent
  

Client impact

• The team delivered six high-quality, approval ready documents under tight EoY timelines. This was the key for holding appropriate model reserves
  
• Regulator-ready model development and validation documents at the end of the project
  

Questions

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