Clients should prepare to pay MVA costs, say dealers

Risk USA: Banks say new trades and novations create real funding costs

image of coins being weighed
Dealers looking to pass on margin valuation adjustment costs

The buy side should prepare to shoulder the cost to banks of funding initial margin on non-cleared derivatives, say market participants.

Since September 1, more than 20 of the world's largest banks have been required by US regulators to post initial margin for trades conducted between them under non-cleared swaps rules. The cost of funding this new collateral requirement is called margin valuation adjustment (MVA), and is a change to the price of a trade.

MVA pricing is still new and approaches

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