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.
Year of the XVAs: top technical papers and authors of 2015
Funding valuation adjustment under the microscope, along with other, newer XVAs
MVA will be a ‘game-changer’, say valuation experts
Leap in initial margin will cut CVA, FVA and KVA, but generate new funding effects
FVA for general instruments
Alexander Antonov, Bianchetti and Mihai develop a universal and efficient approach to numerical FVA calculation
Supervisors need to understand XVAs – OCC official
Benhart confirms OCC examiners are looking at valuation adjustments
Albanese: crushing capital costs
Having tackled FVA, Claudio Albanese is now focused on capital optimisation
Traders see DVA adjustment as 'accounting fudge'
Dealers at London event remain unconvinced by controversial funding adjustment
FVA – what's wrong, and how to fix it
Albanese and Andersen elaborate on controversial Risk article
Banks shun internal models in CVA impact study
Accounting exposures win out as banks seek to align capital with front-office practice
Veolia: taking XVAs by the horns
Veolia's Damien Vancraeyneste, on capping costs and challenging banks’ calculations
The rise of KVA: how 10 banks are pricing the capital crunch
Risk survey shows new add-on is gaining acceptance and could reshape the swaps business
Banks split on accounting for KVA – Risk survey
Accounting standard is coming, say some - others see no KVA requirement
KVA losses would outweigh FVA – Risk survey
Respondents reveal huge gulf in pricing for generic swap
Wrong-way risk done right
Jacky Lee and Luca Capriotti present an arbitrage-free valuation method for counterparty exposure of credit derivates portfolios.
‘Smart’ derivatives can cure XVA headaches
Cryptocurrency technology could revolutionise derivatives valuation and collateralisation, say Massimo Morini and Robert Sams
Corporates use XVA caps to limit unwind charges
Veolia caps CVA and FVA unwind costs in trades with 10 banks
Efficient XVA management: pricing, hedging and allocation
Kenyon and Green show how certain technical elements simplify XVA management
FVA models overstate costs – Risk.net poll
Just over two-thirds say the current FVA approach is wrong
Cutting Edge introduction: Taming MVA
Lloyds quants tackle computation of margin add-on for derivatives prices
Small banks underpricing FVA, dealers claim
Dealers claim to be losing trades because smaller rivals are mispricing
Putting FVA in a cage
If banks can't standardise funding charges, accountants or regulators should step in
The black art of FVA, part III: a $4 billion mistake?
Quants argue banks are inflating FVA; Crédit Agricole among those weighing new approach
FVA: How six smaller banks do it
From ING to Danske Bank, regional players are taking part in the FVA debate, but practices are mixed
Basel Committee launches FVA project
US regulators also looking into divergent valuations for uncollateralised swaps
Goodbye Sonia flat: banks rethink swaps with bond collateral
Higher discount rate can cut payouts to in-the-money clients by millions