FVA for general instruments

Computing the funding valuation adjustment (FVA) is hard, as it requires the numerical solution of generally non-linear partial differential equations. In this paper, Alexander Antonov, Marco Bianchetti and Ion Mihai develop a universal and efficient approach to numerical FVA calculation for portfolios of general instruments with multiple stochastic assets and funding sources

One of the main lessons from the crisis has been that the price of financial instruments must include credit and funding risk components. The credit risk component accounts for the risk of default of the counterparties involved in the transaction, and leads to credit and debt valuation adjustments (CVA and DVA). The funding risk component accounts for the costs and benefits of the strategy adopted to borrow and lend the funds required or generated by the derivative, the hedge, and their possible