Business case
A corporate and investment bank developed calculation prototypes to address new CRR3 requirements for CVA risk and exposure at default on repos. As the target calculation engine was not yet finalised, the client required an independent review to assess whether the prototypes could be used as a temporary solution for the first CRR3 regulatory closings.
The review covered the Basic Approach for CVA, including BA-CVA formulas, hedges, exclusions, reporting and regulatory requirements under CRR3. A structured unit testing framework was deployed, with more than 200 test cases on fictitious data and comparison against a reference model, alongside a similar review approach for EAD repos.
Accuracy designed and executed a structured independent testing framework to assess the compliance and robustness of the BA-CVA and EAD repos prototypes. We identified gaps versus CRR3 regulatory requirements, documented functional and methodological issues, and formulated actionable recommendations to support regulatory exercises and the validation of results produced by the prototypes.