KVA: banks wrestle with the cost of capital

As the bank capital burden grows, dealers are trying to price in the associated costs

risk-0314-pricing-number-jumble-app
Calculation challenge: KVA is bafflingly complex

In principle, derivatives pricing adjustments are simple, sensible things, and capital valuation adjustment (KVA) is no different. The newest addition to the family – known collectively as XVAs – reflects the capital a trade consumes over its lifetime, which is an obvious source of cost or benefit, and large dealers are increasingly incorporating it in their prices.

"You can't really fly blind in this regulatory environment; it is not very forgiving," says the head of the XVA desk at a leading

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 [email protected] or view our subscription options here: http://subscriptions.risk.net/subscribe

You are currently unable to copy this content. Please contact [email protected] to find out more.

To continue reading...

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: