FVA – what's wrong, and how to fix it

Albanese and Andersen elaborate on controversial Risk article

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A capital idea: inclusion of capital as a funding source can shrink reported costs

It proved controversial when we wrote – in the February issue of Risk – that the most common way of calculating funding valuation adjustment (FVA) could lead to exaggerated writeoffs of net income. That was no surprise, given the industry had collectively taken losses in the multiple billions of dollars during 2013 and 2014.

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In response to comments we received about the article, we want to elaborate on the standard funding cost adjustment/funding benefit

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