Risky funding with counterparty and liquidity charges
Risky funding with counterparty and liquidity charges
The pricing of funding liquidity and the pricing of counterparty credit risk are closely related. Companies usually calculate a spread for funding costs that includes compensation for their own risk of default. However, interactions between the two are still poorly understood, while banks are in need of a sound framework to underpin consistent policies for charging funding and credit costs. In this article, we try to provide the cornerstones of a unified consistent framework for liquidity and
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