
Capital valuation adjustment: our coverage of KVA
Roundup of articles on the emerging discipline

The rise of KVA: how 10 banks are pricing the capital crunch
As more banks start pricing capital costs – or KVA – into their derivatives trades, questions are multiplying. In the first survey of its kind, global and regional banks give their answers
Banks split on accounting for KVA – Risk survey
The capital valuation adjustment accounting standard is coming, say some, but others see no KVA requirement
KVA: banks wrestle with the cost of capital
If the price of a derivative should reflect hedging and funding costs, it should also – probably – reflect capital consumption. The resulting adjustment, known as KVA, is gaining tentative acceptance, but the correct methodology is the subject of disputes
KVA: capital valuation adjustment by replication
Credit (CVA), debit (DVA) and funding (FVA) valuation adjustments are now familiar concepts, but banks also pay for capital. In this technical paper, Andrew Green, Chris Kenyon and Chris Dennis introduce a capital valuation adjustment to pricing by extending the Burgard-Kjaer semi-replication method, considering that capital may reduce funding needs and hedging transactions themselves generate capital requirements
KVA losses would outweigh FVA – Risk survey
The poll reveals a huge gulf in the size of the adjustment respondents calculate for a generic interest rate swap
'Smart' derivatives can cure XVA headaches
Many traders would blame regulation or patchy collateralisation for the pricing add-ons that are making the swap market more complex. In fact, argue Massimo Morini of Banca IMI and Robert Sams of Clearmatics, the problem is outdated technology and the solution can be found in the world of crypto-currencies
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 info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
More on Derivatives
Swap Connect shines light on US client clearing hurdles
New scheme may intensify calls for CFTC to reassess its exempt DCO limitations
US life insurer index options market hits $1trn mark
Counterparty Radar: Lincoln Financial emerges as top player in Q4 with $43 billion portfolio increase
Long-end euro swap pricing anomaly remains largely untapped
Deviation in swap curve attracts limited interest because of regulatory and pension reform barriers
SG1 growth slower than expected, say LPs
Despite sluggish take-up of Singapore FX matching engines, some hope a new NDF venue will offer a boost
Eurex scrambles to avert Treasury collateral ban on US default
Current policy prevents CCP from selectively excluding eligible collateral
Regional banks face soaring term SOFR spreads
Bid/offers hit 10bp as dealers price counterparty risk into non-cleared Libor transition trades
Information geometry of risks and returns
An innovative product design framework and its geometric interpretation is introduced
US court greenlights most claims in Currenex class action
Civil lawsuit brought by XTX and two other financial firms advances to next stage before trial