Dodgy discounts: DVA claims fly in cross-currency market

Funding benefits have helped bring down the cost of cross-currency swaps in the past couple of years, but as competition becomes increasingly cut-throat, traders claim their rivals are offering a dodgier discount – the own-credit effects of debit valuation adjustment

Traders distrust DVA because the theoretical gain that arises when a bank's own credit spreads widen is difficult to monetise

A surge in euro borrowing by corporates over the past year has been supported by a dramatic narrowing of dealer charges for cross-currency swaps – a result of fierce competition among dealers, as well as the industry's increasing confidence in recognising the funding benefits these trades can generate. In some cases, though, pricing has become so cheap banks claim it can only be explained by the use of a widely derided adjustment for a dealer's own risk of default.

Critics say the debit

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