Funding pain prompts calls to rehome FVA

Dealers push to move derivatives funding costs out of P&L following March’s outsize losses

An arcane corner of the derivatives market has moved centre stage after huge swings in funding costs earlier this year forced banks to revalue trades and book billions in losses.

Funding valuation adjustment, or FVA, is one of the changes banks make to the fair value of their derivative trades to take into account various risks. Some of these changes are hedgeable. Some are not.

FVA, banks say, is not. Traders are now calling for FVA to be moved out of the profit and loss statement to avoid

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