KVA losses would outweigh FVA – Risk survey

Respondents reveal huge gulf in pricing for generic swap

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

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