bacva

R2026b

Create bacva object to support ISDA BA-CVA

Since R2026b

Description

A bacva object provides an object-based framework that supports Basel-compliant, International Swaps and Derivatives Association (ISDA^®) workflows for calculating credit valuation adjustment (CVA) capital using the Basic Approach (BA-CVA) per Basel MAR50 rules. To create a bacva object using the bacva function, you need a file in the BA-CVA Common Risk Interchange Format (CRIF), a standardized format developed by the ISDA for reporting CVA capital under the BA-CVA framework. For more information on creating an ISDA BA-CVA CRIF file, see ISDA BA-CVA CRIF File Specifications.

A bacva object includes a vector of bacva.Portfolio objects, each of which represents a single BA-CVA portfolio containing counterparty exposure and hedge sensitivities. A bacva.Portfolio object includes a vector of bacva.Sensitivity objects, each of which represents a single row from a BA-CVA CRIF file, containing either a counterparty exposure or a CVA hedge.

After creating a bacva object, use the capital object function to calculate BA-CVA capital requirements for each portfolio.

Creation

Syntax

myBACVA = bacva(BACVACRIF)

myBACVA = bacva(BACVACRIF,Name=Value)

Description

myBACVA = bacva(BACVACRIF) creates a bacva object with default properties using the input data specified by BACVACRIF.

myBACVA = bacva(BACVACRIF,Name=Value) specifies additional options using one or more name-value arguments. For example, Model="Reduced" specifies to create the object using the BA-CVA reduced model, and DomesticCurrency="EUR" specifies Euro as the currency.

Input Arguments

BACVACRIF — ISDA BA-CVA data descriptor

string | table

ISDA BA-CVA CRIF data descriptor, specified as a string or a table.

• If you specify BACVACRIF as a string, the value of the string must be the name of an ISDA BA-CVA CRIF file.

• If you specify BACVACRIF as a table, the table must be in the format of an ISDA BA-CVA CRIF file. For more information on creating an ISDA BA-CVA CRIF file, see ISDA BA-CVA CRIF File Specifications.

The ISDA BA-CVA CRIF file facilitates the exchange of credit valuation adjustment risk information between market participants and regulatory authorities. The file provides a structured and consistent format for reporting key data elements related to counterparty credit risk exposures and CVA hedging instruments.

The ISDA BA-CVA CRIF file typically includes information such as:

• Exposure data — This data includes details about the counterparty exposures, such as counterparty identifiers, effective maturity, exposure at default (EAD), credit quality, and sector bucket assignments.

• Hedge data — This data includes information about single-name and index credit default swap (CDS) hedges used to mitigate CVA risk, including notional amounts, maturities, and risk weights.

• Counterparty data — This data includes information about counterparty groups, regions, and credit quality classifications (investment grade or high yield/not rated).

Name-Value Arguments

Specify optional pairs of arguments as Name1=Value1,...,NameN=ValueN, where Name is the argument name and Value is the corresponding value. Name-value arguments must appear after other arguments, but the order of the pairs does not matter.

Example: myBACVA = bacva("BACVA_CRIF.csv",Model="Reduced",EADModel="IMM",DomesticCurrency="EUR") creates a bacva object using the BA-CVA reduced model with the internal model method (IMM) as the EAD model and Euro as the currency.

DomesticCurrency — ISO currency code for domestic currency

"USD" (default) | string

ISO currency code for the domestic currency, specified as a string.

This argument sets the DomesticCurrency property.

Example: DomesticCurrency="EUR"

FXSpotRates — Spot foreign exchange rates

table.empty (default) | table

Spot foreign exchange rates, specified as a table. Specify the table with these columns:

• Base — String specifying the ISO currency code of the base currency

• Quote — String specifying the ISO currency code of the quote currency

• SpotRate — Numeric value specifying the spot exchange rate

This argument sets the FXSpotRates property.

Example: FXSpotRates=table("USD","EUR",0.9,VariableNames=["Base" "Quote" "SpotRate"])

Model — BA-CVA model type

"Full" (default) | "Reduced"

BA-CVA model type, specified as "Full" or "Reduced".

• "Full" — The BA-CVA full model recognizes eligible CVA hedges (single-name CDS, single-name contingent CDS, and index CDS). The software computes capital as a weighted combination of nonhedged and hedged capital using the Beta name-value argument.

• "Reduced" — The BA-CVA reduced model does not recognize hedges. The software computes capital based solely on nonhedged capital.

This argument sets the Model property.

Example: Model="Reduced"

Beta — Weight of nonhedged capital in full capital

0.25 (default) | numeric value in the range [0,1]

Weight of the nonhedged capital (Kreduced) in full capital, specified as a numeric value in the range [0,1]. The weight of the hedged capital (Khedged) is 1 − Beta. The full capital (Kfull) is Kfull = BetaKreduced + (1 − Beta)Khedged.

Specify Beta as 0 if you want to recognize hedges fully. Specify Beta as 1 if you do not want to recognize hedges at all.

This argument sets the Beta property.

Note

If you specify Model as "Reduced", then the function ignores Beta.

Example: Beta=0

CounterpartyRho — BA-CVA counterparty rho correlation

0.5 (default) | numeric value in the range [0,1]

BA-CVA counterparty rho correlation, specified as a numeric value in the range [0,1].

This argument sets the CounterpartyRho property.

Example: CounterpartyRho=0.35

DiscountScalar — BA-CVA discount scalar

0.65 (default) | nonnegative numeric value

BA-CVA discount scalar, specified as a nonnegative numeric value.

• If you specify Model as "Full", then the full BA-CVA capital is DiscountScalarKfull.

• If you specify Model as "Reduced", then the full BA-CVA capital is DiscountScalarKreduced.

  This argument sets the DiscountScalar property.

Example: DiscountScalar=0.5

EADModel — Exposure at default model

"SA-CCR" (default) | "IMM"

Exposure at default model, specified as "SA-CCR" or "IMM".

• "SA-CCR" — Standardized Approach for Counterparty Credit Risk. The supervisory discount factor for each netting set is $$\frac{1-e^{-0.05M_{\text{NS}}}}{0.05M_{\text{NS}}}$$.

• "IMM" — Internal Model Method. The supervisory discount factor for each netting set is 1.

This argument sets the EADModel property.

Example: EADModel="IMM"

Output Arguments

myBACVA — BA-CVA framework for calculating CVA capital requirements

bacva object

BA-CVA framework for calculating CVA capital requirements, returned as a bacva object.

Properties

General

CRIF — ISDA BA-CVA CRIF data

Read-only: table

This property is read-only.

ISDA BA-CVA CRIF data, represented as a table.

NumPortfolios — Number of portfolios

Read-only: nonnegative integer

This property is read-only.

Number of portfolios, represented as a nonnegative integer.

Data Types: double

PortfolioIDs — Portfolio IDs

Read-only: NumPortfolios-by-1 string vector

This property is read-only.

Portfolio IDs, represented as a NumPortfolios-by-1 string vector.

Portfolios — Portfolios

Read-only: NumPortfolios-by-1 vector of bacva.Portfolio objects

This property is read-only.

Portfolios, represented as a NumPortfolios-by-1 vector of bacva.Portfolio objects. For more information, see bacva.Portfolio Properties.

Qualifiers — Applicable sensitivity qualifiers

Read-only: string vector

This property is read-only.

Applicable sensitivity qualifiers, represented as a string vector. Examples of applicable sensitivity qualifiers include counterparties and currencies.

Regulation — Indicator of Basel regulation

Read-only: "Basel_MAR50"

This property is read-only.

Indicator of Basel regulation, represented as "Basel_MAR50".

DomesticCurrency — ISO currency code for domestic currency

string

This property is read-only after object creation.

ISO currency code for the domestic currency, specified as a string.

FXSpotRates — Spot foreign exchange rates

table

This property is read-only after object creation.

Spot foreign exchange rates, specified as a table. Specify the table with these columns:

• Base — String specifying the ISO currency code of the base currency

• Quote — String specifying the ISO currency code of the quote currency

• SpotRate — Numeric value specifying the spot exchange rate

Model — BA-CVA model type

"Full" | "Reduced"

This property is read-only after object creation.

BA-CVA model type, specified as "Full" or "Reduced".

• "Full" — The BA-CVA full model recognizes eligible CVA hedges (single-name CDS, single-name contingent CDS, and index CDS). The software computes capital as a weighted combination of nonhedged and hedged capital using the property.

• "Reduced" — The BA-CVA reduced model does not recognize hedges. The software computes capital based solely on nonhedged capital.

Beta — Weight of nonhedged capital in full capital

numeric value in the range [0,1]

This property is read-only after object creation.

Weight of the nonhedged capital (Kreduced) in full capital, specified as a numeric value in the range [0,1]. The weight of the hedged capital (Khedged) is 1 − Beta. The full capital (Kfull) is Kfull = BetaKreduced + (1 − Beta)Khedged.

Data Types: double

CounterpartyRho — BA-CVA counterparty rho correlation

numeric value in the range [0,1]

This property is read-only after object creation.

BA-CVA counterparty rho correlation, specified as a numeric value in the range [0,1].

Data Types: double

DiscountScalar — BA-CVA discount scalar

nonnegative numeric value

This property is read-only after object creation.

BA-CVA discount scalar, specified as a nonnegative numeric value.

• If Model is "Full", then the full BA-CVA capital is DiscountScalarKfull.

• If Model is "Reduced", then the full BA-CVA capital is DiscountScalarKreduced.

Data Types: double

EADModel — Exposure at default model

"SA-CCR" | "IMM"

This property is read-only after object creation.

Exposure at default model, specified as "SA-CCR" or "IMM".

RiskWeights — BA-CVA risk weights

Read-only: table

This property is read-only.

BA-CVA risk weights, represented as a table.

Correlations — BA-CVA correlations

Read-only: table

This property is read-only.

BA-CVA correlations, represented as a table.

Object Functions

capital

Calculate BA-CVA capital requirements

Examples

Create bacva Object Using BA-CVA CRIF File

Create a bacva object with default properties using the BA-CVA CRIF file BACVA_CRIF_01.csv, which is attached to this example.

myBACVA = bacva("BACVA_CRIF_01.csv")

myBACVA = 
  bacva with properties:

                CRIF: [60×14 table]
       NumPortfolios: 21
        PortfolioIDs: [21×1 string]
          Portfolios: [21×1 bacva.Portfolio]
          Qualifiers: [28×1 string]
          Regulation: "Basel_MAR50"
    DomesticCurrency: "USD"
         FXSpotRates: [0×0 table]
               Model: "Full"
                Beta: 0.2500
     CounterpartyRho: 0.5000
      DiscountScalar: 0.6500
            EADModel: "SA-CCR"
         RiskWeights: [8×3 table]
        Correlations: [5×2 table]

You can then use the capital object function with the bacva object.

Create bacva Object with Specified Properties

Create a bacva object using the BA-CVA CRIF file BACVA_CRIF_01.csv, which is attached to this example. Specify the reduced BA-CVA model type, internal model method for the exposure at default model, and Euro for the domestic currency using the Model, EADModel, and DomesticCurrency name-value arguments, respectively.

myBACVA = bacva("BACVA_CRIF_01.csv",Model="Reduced",EADModel="IMM",DomesticCurrency="EUR")

myBACVA = 
  bacva with properties:

                CRIF: [60×14 table]
       NumPortfolios: 21
        PortfolioIDs: [21×1 string]
          Portfolios: [21×1 bacva.Portfolio]
          Qualifiers: [28×1 string]
          Regulation: "Basel_MAR50"
    DomesticCurrency: "EUR"
         FXSpotRates: [0×0 table]
               Model: "Reduced"
                Beta: 0.2500
     CounterpartyRho: 0.5000
      DiscountScalar: 0.6500
            EADModel: "IMM"
         RiskWeights: [8×3 table]
        Correlations: [5×2 table]

More About

BA-CVA

BA-CVA (Basic Approach for Credit Valuation Adjustment) is a Basel Committee on Banking Supervision framework for calculating capital requirements to cover the risk of mark-to-market losses on derivative portfolios due to deterioration in counterparty creditworthiness.

Under the Basel MAR50 rules, the BA-CVA framework provides two calculation models:

• Full Version — The full model computes capital by recognizing eligible hedging instruments (single-name CDS, single-name contingent CDS, and index CDS). The full capital is a weighted combination of K_reduced and K_hedged, controlled by the beta parameter, which imposes a floor on the hedging benefit.

• Reduced Version — The reduced model computes capital without recognizing the risk-reducing benefit of CVA hedges. The formula aggregates standalone CVA capital charges (SCVA) across counterparties using a supervisory correlation parameter (rho) to capture systematic and idiosyncratic risk components.

The framework assigns counterparties to sector buckets with corresponding risk weights based on credit quality (investment grade or high yield/not rated). The framework uses supervisory discount factors derived from the effective maturity of netting sets.

CVA

CVA (Credit Valuation Adjustment) is an adjustment to the fair value of derivative instruments to account for counterparty credit risk.

CVA represents the market value of counterparty credit risk and reflects the difference between the risk-free portfolio value and the true portfolio value, which accounts for the possibility of counterparty default. The CVA capital charge requires that banks hold sufficient capital to absorb potential losses arising from changes in CVA due to movements in counterparty credit spreads and market risk factors.

References

[1] Bank for International Settlements. "MAR50 — Credit Valuation Adjustment Framework." January 2023. https://www.bis.org/basel_framework/chapter/MAR/50.htm.

[2] Bank for International Settlements. "CRE52 — Standardised Approach to Counterparty Credit Risk." June 2020. https://www.bis.org/basel_framework/chapter/CRE/52.htm.

Version History

Introduced in R2026b