Driving Precision in XVA Calculations: MuniFin Success Story
The financial landscape is evolving at a rapid pace, driving institutions to adopt innovative tools to maintain their competitive edge. As part of this evolution, x-valuation adjustments (XVA) have grown in importance and fundamentally reshaped how financial institutions manage their derivatives portfolios.
Proper XVA management enables firms to achieve precise valuations, comply with regulatory requirements, and gain deeper insights into risk exposures. Numerix Oneview addresses XVA challenges head on—delivering advanced, high performance XVA capabilities that help institutions streamline complex valuation workflows, enhance transparency, and make faster, better-informed decisions.
In this blog, we explore the importance of XVA, highlight its core applications, and showcase how MuniFin, one of Finland’s top financial institutions, leverages Numerix Oneview for robust XVA calculations.
What is XVA and Why Does It Matter?
XVA is a collective term for valuation adjustments applied to derivatives. These adjustments address the costs and risks impacting the value of these financial instruments. Examples of XVA include credit valuation adjustment (CVA), funding valuation adjustment (FVA), and collateral valuation adjustment (CollVA).
XVAs help enable the following key areas:
- Enhanced Pricing Transparency: XVA integrates multiple risk factors into pricing, offering a clear and comprehensive view of a portfolio's true value.
- Regulatory Compliance: With stricter regulations, financial institutions must adopt advanced valuation frameworks to meet capital adequacy and reporting requirements.
- Risk Management: By identifying risk sensitivities, XVA facilitates robust hedging strategies, reducing exposure and enhancing stability.
For institutions managing large derivatives portfolios, the ability to calculate XVA efficiently and accurately is critical.
MuniFin’s Journey to XVA Excellence
MuniFin (Municipality Finance Plc), with a balance sheet exceeding EUR 50 billion, is a key player in sustaining Finland's economy. The firm specializes in financing municipalities, public-sector projects, and sustainable housing. Among its diverse financial operations, MuniFin actively participates in derivatives management to hedge its loan exposure and optimize financial strategies.
In 2013, MuniFin recognized the strategic importance of implementing a robust XVA framework in order to align with industry best practices and enhance valuation precision. The increasing sophistication of derivatives required a powerful engine to handle complex XVA calculations, ensure regulatory compliance, and support competitive pricing.
Given MuniFin’s existing use of Numerix for financial instrument valuation, extending that partnership to include XVA was a natural fit, enabling MuniFin to seamlessly integrate XVA capabilities into its infrastructure and enhance its overall risk management approach.
Why Numerix Oneview?
MuniFin had been a Numerix client since 2007, using Numerix’s valuation engines to manage structured trades successfully. When extending their capabilities to XVA, the organization chose Numerix Oneview for several reasons. “Since we were already happy with the performance of Numerix valuation engines, we were confident that integrating Oneview for XVA was the ideal solution for MuniFin,” commented Jaakko Juntunen, VP and Head of Risk Management, MuniFin.
Automation and Scalability: Numerix Oneview replaced manual workflows with automated pipelines. According to Juntunen, “Everything now runs automatically overnight, with results ready by the next morning. This has been a game-changer for scalability, reliability, and visibility into data at MuniFin.”
Comprehensive XVA Framework: Oneview supports sophisticated models for CVA, FVA, and other XVA measures, ensuring market-aligned valuation precision.
Seamless Integration: Integration with MuniFin’s existing valuation infrastructure allowed for operational harmony and consistent performance.
Flexibility for Customization: Numerix Oneview’s transparent architecture empowered MuniFin to enhance valuation models independently. Juntunen highlighted this as a standout feature, describing that the platform offers the flexibility and functionality his team needs to build and refine models efficiently.
Results that Speak for Themselves
The implementation of Numerix Oneview resulted in significant enhancements to MuniFin’s risk management operations and introduced greater efficiencies. The system also enabled rapid calculations of market risk and XVA sensitivities, supporting improved pricing precision and scenario analysis.
Highlighted results include:
Operational Efficiency: MuniFin instilled greater automation into their valuation workflows, drastically reducing manual efforts.
Valuation Accuracy: Precise adjustments and sensitivities were calculated, facilitating compliant and high-quality reporting.
Flexibility and Scalability: Numerix Oneview’s architecture enabled MuniFin’s ongoing optimization and alignment with evolving market requirements.
Streamlined Workflows: MuniFin now benefits from overnight automated calculations, fast pricing and scenario analysis, and continuous system enhancements.
The Broader Impact of Numerix Oneview for XVA
The MuniFin success story underscores the importance of precise XVA in enterprise financial operations. As firms face greater market complexity and regulatory rigor, tools like Numerix Oneview empower them to respond with agility, precision, and confidence.
Juntunen sums it up best, saying, “Numerix helps us stay ahead of changing industry practices and empowers us with both stability and adaptability. The flexibility we now enjoy is indispensable.”
For deeper insight into MuniFin’s use and results with Numerix Oneview for XVA, read our full-length case study available here: Driving Excellence in XVA: MuniFin’s Strategic Integration of Numerix Oneview