Hedging valuation adjustment gets cold shoulder from banks

Dealers back the idea of charging for hedging costs but not as part of a new XVA

The market shocks set off by Covid-19 last year supplied striking proof that the costs of hedging and re-hedging derivatives trades could be, in the words of one senior banker, “phenomenal”. Yet these costs are not always baked into the price of the trade at the outset, hitting banks when bid-offer spreads widen.

Most dealers agree that hedging costs should be included in the price of a trade, but opinions differ when it comes to how they should be treated: as a transparent add-on to the price

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 copy this content. Please contact info@risk.net to find out more.

Sorry, our subscription options are not loading right now

Please try again later. Get in touch with our customer services team if this issue persists.

New to Risk.net? View our subscription options

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here