A few years ago, CVA trading was the big new thing. Now, however, the counterparty valuation adjustment (CVA) desks which hedge against a bank’s aggregated counterparty risk are old hat. And recruiters say that some very good CVA traders are kicking around with nothing to do.
“There was loads of hiring for CVA desks a few years ago,” says Dean Looney, head of the technology practice at NJF Search in London and a former CVA-specialist headhunter. “But the market’s changed and people who’ve been pigeon-holed as CVA specialists are finding it difficult to get new positions. I’ve got a few world class CVA guys on my books and because they’ve only done CVA it’s hard to place them.”
JPMorgan is currently looking for a vice president-level trader to work in its credit portfolio group in London. This group helps the bank manage the credit risk associated with its loan portfolio and derivatives transactions. However, the trader in question will need to know not just about CVA but funding valuation adjustment (FVA) too. This is typical. JPMorgan, Barclays and Bank of America have all set up so-called ‘XVA desks’ to manage all their derivatives valuation adjustments – namely DVA, CVA, FVA and – more recently K-CVA desks (where K stands for the capital requirement under Basel II regulatory calculations).
Pure CVA traders are becoming extinct
“CVA has now been extended to cover all the issues around derivative funding,” says Thu-Uyen Nguyen, a former Merrill Lynch derivatives trader-turned senior partner at Solum Financial Partners, a consultancy offering advice on trading credit risk. “All the new accounting adjustments that you need to take into consideration when trading derivatives are being centralized,” she adds.
Recruiters say that some banks which previously had 10 or 12 people working on CVA trading desks have now cut that back to four or five. However, Nguyen says that as long as CVA traders have a broad skillset that allows them to look at everything on the new XVA desks, they should still be well placed. “If anything, these desks will get bigger and are going to need more people,” she says. And if you only know about CVA? Nguyen says Solum would be interested in hearing from you. “We’re always interested in hiring opportunistically,” she tells us.