KVA losses would outweigh FVA – Risk survey

rising-costs — Capital burden is rising, but banks are not fully pricing KVA

Nazneen Sherif
01 Sep 2015

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Banks could lose billions of dollars collectively if they revalue their derivatives books to take into account the lifetime capital costs of post-crisis regulatory reforms, according to a survey conducted by Risk – the first to ask the industry about the emerging discipline of capital valuation adjustment (KVA).

The survey also reveals a huge gulf in the size of the adjustment respondents calculate for a generic interest rate swap, with the charge for a BB-rated counterparty ranging from €15

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