FVA models overstate costs – Risk.net poll
Just over two-thirds say the current FVA approach is wrong
Two-thirds of respondents to a Risk.net poll believe banks are using a flawed methodology to incorporate funding costs into derivatives values, resulting in losses that are too high.
Sixty-seven percent of respondents support the argument put forward by three quants in a technical paper in Risk in February, which claimed typical approaches to funding valuation adjustment (FVA) produce significantly inflated costs.
The quants proposed a new approach that cut FVA losses by around two-thirds in
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