Valuation adjustments (XVAs)
WHAT IS THIS? The XVAs are a family of adjustments that can be made to the price of a derivatives trade, reflecting counterparty risk (CVA), own-default risk (DVA), funding (FVA), capital (KVA) and margin (MVA). Their theoretical roots and practical implementation are still debated, but pragmatism also matters: banks that ignore XVAs are at risk of mispricing a trade; banks that include them are at risk of never winning a trade.
Can Citi’s XVA desk help solve risk data failings?
Resolution plan reviews exposed material limitations in banks’ ability to unwind derivatives
Japanese banks reap ¥9trn RWA savings from FRTB switch
Tokyo’s dealers fare better than overseas rivals on new CVA and market risk approaches
Basel triggers new tussle on anti-Archegos rules
Critics argue new guidelines on counterparty credit risk are either unworkable, or don’t go far enough to tackle concentration and wrong-way risk
DVAs inflate US banks’ liabilities by $4.9bn
Credit spread retrenchment since last year’s crisis comes with flipside of larger structured-product liabilities
Mastering XVA dynamics from the buy side
Amid fluctuating prices and macroeconomic uncertainty, buy-side firms are taking a more proactive role in challenging the derivatives valuations of their sell-side counterparties
CVA swap: a new type of capital relief trade
Dmitry Pugachevsky, Quantifi, discusses the emergence of the CVA swaps market
Future expectations for XVA and counterparty credit risk management
Alberto Micucci, director, financial risk and analytics at S&P Global Market Intelligence, discusses his future expectations for XVA and counterparty credit risk management.
New developments in XVA: bank strategy in a changing world
Derivatives valuation has grown in complexity since the the financial crisis that began in 2007–08. It now encompasses a broader range of risk factors, including credit, funding, margin and capital – all of which can affect banks’ competitiveness and…
Buy-siders bemoan ‘dark arts’ of corporate bond CSA discounting
Litany of pricing variables fuel wide differences in how dealers calculate discount rates for collateral agreements
XVA dynamics from a buy-side perspective: the latest strategies and insights
XVA components have once again gained prominence as crucial factors impacting the earnings of financial institutions. This webinar explores key aspects of XVA from a buy-side perspective, shedding light on strategies to navigate this complex terrain and…
How to account for banks’ contribution to CO2 emissions
Price adjustments will depend on individual counterparties’ carbon footprints
Pricing the transition of Scope 3 emissions
A framework to measure banks’ costs associated with carbon emissions is proposed
Derivatives valuation swings lop $2.4bn off BofA’s income in Q2
DVAs and markdowns on fair-value hedges return to drag on dealer’s revenue
Trading risks and a spotlight on XVA
Panellists at Risk Live Europe 2023 discussed the usefulness, limitations and outlook for valuation adjustments
New developments in XVA: an inside view on bank strategy in a changing world
This webinar addresses market issues and explores banks' strategies for optimising capital efficiency, shedding light on how banks are adapting to changing regulation, how they minimise the impact of market volatility on capital requirements and how…
Optical computer beats quantum tech in tricky settlement task
Microsoft’s analog technology twice as accurate compared to IBM’s quantum kit in Barclays experiment
ECB zeroes in on wrong-way risk as a key lesson of Archegos
Counterparty risk experts agree with focus on “long-neglected” topic after family office default
Crédit Agricole’s XVA head departs
Laurent Chédin is leaving the banking sector; Mickael Crabos takes his place
CVA desks avoided re-hedging as Credit Suisse teetered
As credit spreads blew out, dealers opted not to adjust rates and FX risks
BofA’s DVA losses inflated to $193m in Q4
Latest hit is largest since 2020, but still leaves positive result for 2022
UK banks’ CVA charges ballooned by £8bn in volatile Q3
Bank of England figures show capital requirements at highest since early pandemic readings