Capital valuation adjustment: our coverage of KVA

A roundup of our articles on the emerging discipline of KVA

abstract-yellow-grey

The rise of KVA: how 10 banks are pricing the capital crunch
As more banks start pricing capital costs – or KVA – into their derivatives trades, questions are multiplying. In the first survey of its kind, global and regional banks give their answers

Banks split on accounting for KVA – Risk survey
The capital valuation adjustment accounting standard is coming, say some, but others see no KVA requirement

KVA: banks wrestle with the cost of capital
If the price of a derivative should reflect hedging and funding costs, it should also – probably – reflect capital consumption. The resulting adjustment, known as KVA, is gaining tentative acceptance, but the correct methodology is the subject of disputes

KVA: capital valuation adjustment by replication
Credit (CVA), debit (DVA) and funding (FVA) valuation adjustments are now familiar concepts, but banks also pay for capital. In this technical paper, Andrew Green, Chris Kenyon and Chris Dennis introduce a capital valuation adjustment to pricing by extending the Burgard-Kjaer semi-replication method, considering that capital may reduce funding needs and hedging transactions themselves generate capital requirements

KVA losses would outweigh FVA – Risk survey
The poll reveals a huge gulf in the size of the adjustment respondents calculate for a generic interest rate swap

'Smart' derivatives can cure XVA headaches
Many traders would blame regulation or patchy collateralisation for the pricing add-ons that are making the swap market more complex. In fact, argue Massimo Morini of Banca IMI and Robert Sams of Clearmatics, the problem is outdated technology and the solution can be found in the world of crypto-currencies

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe

You are currently unable to copy this content. Please contact info@risk.net to find out more.

Most read articles loading...

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here