Most banks stick to tried-and-trusted XVA models
Black Scholes- and Heath-Jarrow-Morton-based approaches dominate, with some exploring Copulas for wrong-way risk, post-Archegos
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This piece is part of a series benchmarking bank XVA management practices. Risk Management subscribers can view selected cuts of the underlying data here.
Most dealers’ valuation adjustments (XVA) desks rely on a single dominant approach to modelling valuation adjustments within each asset class, the findings of Risk.net’s inaugural XVA Benchmarking research suggest.
Interest rate modelling is
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