MVA by replication and regression

Burgard and Kjaer method is extended to include margin valuation adjustment

technical blocks


Initial margins (IMs) are required by central counterparties (CCPs) and under Basel Committee for Banking Supervision (2013) between financials on all non-cleared derivatives. Regulatory IM is being phased in from September 2016 to September 2020 (Basel Committee for Banking Supervision 2015). IM is a cost when it must be funded; ie, when IM is one-sided (CCPs) or nonrehypothecable. Usually, rehypothecation is forbidden and segregation mandated, because

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