CU Investment Solutions employs a rigorous valuation methodology to meet stress-testing requirements mandated by the National Credit Union Administration’s (NCUA) Rules and Regulations, Part 704. With this stress-testing framework, CU Investment Solutions projects the net economic value (NEV) of each client's balance sheet under a variety of market scenarios determined by regulation.
In addition to assessing the influence of interest rates on the value of clients' balance sheets, CU Investment Solutions also assesses the influence of changes in four other risk factors – the shape of the interest rate yield curve, implied volatility, quality spreads and scenario-specific prepayment assumptions – on each client's NEV. CU Investment Solutions uses a variety of discounting curves and interest-rate processes to reflect influences to different balance sheet items and embedded option values across valuation scenarios. Applying this modeling rigor to the balance-sheet valuation of corporate credit unions allows them and their constituents to analyze objective, high-quality asset-liability/risk reports produced by industry experts.