The black art of FVA, part III: a $4 billion mistake?

Quants argue banks are inflating FVA; Crédit Agricole among those weighing new approach

Putting an end to it: was FVA a very costly mistake?

A $6.2 billion loss that 24 banks have collectively racked up since the end of 2012 may have been a mistake, new thinking suggests – it should never have been reported as a loss, and should have been smaller. Perhaps by as much as $4 billion.

Those are the startling conclusions of three quants, who published their work in Risk earlier this year (Risk February 2015). They argue funding valuation adjustment (FVA) – the costs and benefits arising when uncollateralised derivatives are hedged with

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact or view our subscription options here:

You are currently unable to copy this content. Please contact to find out more.

Sorry, our subscription options are not loading right now

Please try again later. Get in touch with our customer services team if this issue persists.

New to View our subscription options

You need to sign in to use this feature. If you don’t have a account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here