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.
Banks and clients clash over novation MVA charges
Some banks swallowing new margin funding costs, others forcing clients to pay up
Isda touts CSA standardisation in margining countdown
But scale of challenge becomes clear in early tussles between dealers and clients
Degree of influence, 2016: capital matters
Capital, liquidity and XVAs are still the core of quantitative research in banking
Basel considered axing standardised approach to CVA calculation
Committee discussed axing standardised and basic approaches in recent months, sources say – but ruled out both
Clients should prepare to pay MVA costs, say dealers
Risk USA: Banks say new trades and novations create real funding costs
China rates swap prices diverge on spotty CVA practices
Most local banks not passing on capital charge to clients, say traders
People: Ramambason joins StanChart as head of XVA
Head of financial markets leaves StanChart; SocGen management shuffle; Lake leaves HSBC
StanChart hires Ramambason as head of XVA
Ramambason to lead newly created XVA desk
Traders blame bail-in for Deutsche CDS jump
Debt subordination behind spread widening from January; CVA desks may need to adjust hedge ratios
CME set to clear CMBX index swaps
Product to clear next year amid fears of falling liquidity from new non-cleared margin requirements
Banks warn prime brokerage clients of ‘material’ MVA costs
Some buy-siders reassessing relationships as a result
March margin deadline may force clients onto new CSAs
Dealers say they lack capacity to renegotiate thousands of existing collateral agreements
Managing the alphabet soup of XVAs
Sponsored webinar: Calypso and Quaternion
Dealers grapple with netting valuation adjustments
Some banks are expressing netting uncertainty as a fair value adjustment to CVA
Why not having AAD needn’t be the end of the world
Optimisation method offers quicker and more focused way of making XVA calculations
Risk optimisation: the noise is the signal
Benedict Burnett, Simon O’Callaghan and Tom Hulme introduce a new method of optimising the accuracy and time taken to calculate risk for an XVA trading book. They show how to make a dynamic choice of the number of paths and time discretisation focusing…
The P&L attribution mess
FRTB model approval regime dogged by confusion and controversy
Banks take flexible approach to pricing netting risks
Dealers are adjusting CVA prices, depending on their view of the legal netting opinion
MVA: swaps scale new heights in complexity
Banks are turning their attention to calculating a new derivatives valuation adjustment
Lloyds' CVA head exits for JP Morgan
Julian Keenan leads Asia credit portfolio trading at the US bank
Netting risks create pricing and operational headaches
Oversight of legal risks is not always robust
Details of vital FRTB model test still up for grabs
Banks argue valuation adjustments should be left out of the model approval process
Dealers wake up to MVA impact of new funding rules
NSFR will force dealers to term-fund initial margin at a time when margin volumes are climbing
Senior quant Green swaps Lloyds for Scotiabank
Green to lead development of new XVA pricing model at Canadian lender