Societe Generale: Leading industry practices for real-time identification of risk-efficient trades with a centralised CVA desk

Starting with the 2007-9 financial crisis, which exposed the fallacy in the idea that any market participant is “too big to fail”, banks and their traders have recognized a need to get smarter about counterparty credit risk. As a result, concepts such as credit valuation adjustment (CVA) have evolved from a useful accounting measure into a pricing measure for traders and a key aspect of Basel III compliance.

Societe Generale wanted to take this evolution one step further. It realised the potential of CVA and similar measures to give its traders real-time insight into counterparty credit risk, helping them identify trades that would reduce the bank’s overall exposure – and offer more competitive pricing to low-risk counterparties. To achieve this, traders would need to be able to access accurate CVA pricing at the touch of a button, with response times of just a few seconds. 

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