New research shows FVA is not part of P&L – Duffie

Pricing experts defend practices that resulted in huge FVA losses

Darrell Duffie, Stanford University

Banks were wrong to report more than $6 billion of derivatives funding effects as losses, according to Stanford University finance professor, Darrell Duffie, who claims new research he co-authored puts the issue beyond doubt.

“It shouldn’t be a debate any more,” says Duffie. “I hope we contributed to moving this issue beyond simply debating on what should be done and actually demonstrating exactly what the effects are in terms of market value in the swap book. They land in equity, and we have