FVA accounting, risk management and collateral trading

Albanese, Andersen and Iabichino present a method for accounting and risk managing FVAs

Frustrated man at the blackboard during a maths class


The notion of charging for ‘funding costs'became painfully relevant for banks as their borrowing spreads jumped up during the financial crisis. Drawing inspiration from work by Piterbarg (2010) and Burgard & Kjaer (2011, 2013), several banks recently instituted accounting changes aimed at capturing the funding costs for uncollateralised derivatives transactions. The prevalent funding cost adjustment/funding benefit adjustment (FCA/FBA) accounting method is simple but

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