Funding valuation adjustment (FVA)
FVA, correlation, wrong-way risk: EU stress test’s hidden gems
How much margin is missing in sovereign swaps? The stress test had the answer
EU stress tests show €14bn funding burden on Italy swaps
Fourteen banks had net exposure to Italy in EU tests, implying huge funding costs
KVA: capital valuation adjustment by replication
KVA are introduced to take into account the effect of capital on funding
UBS takes Sfr267 million FVA charge
Swiss bank takes FVA charge and removes DVA double-count
Citi takes $474 million FVA charge
US bank becomes tenth to incorporate effects of funding
Dealers threaten to charge for 0% CSA floors
FVA could result from asymmetry between cleared and bilateral trades
Risk-neutral pricing – Hull and White debate Kenyon and Green
XVA specialists spark debate on regulation and risk-neutrality
Regulatory costs break risk neutrality
Regulations impose idiosyncratic capital and funding costs for holding derivatives. Idiosyncratic costs mean that no single measure makes derivatives martingales for all market participants. Chris Kenyon and Andrew Green demonstrate that regulatory…
UK utilities weigh creative inflation-hedge revamps
Yorkshire Water among the firms said to be considering inflation repacks
Trends in risk management
Sponsored survey analysis: SunGard
Tarf trouble in Taiwan: Sliding renminbi threatens heavy losses
Taiwan's regulator warns banks about structured hedges
Dealers charging FVA on collateralised swaps
If collateral cannot easily be repoed, dealers say funding charge should apply
FVA is looking more like a pet than a monster
Auditors are allowing banks to sidestep problems
The black art of FVA, part II: Conditioning chaos
Banks under pressure to join JP Morgan and others that have embraced FVA - but complexity is huge and consensus elusive
Regulatory-optimal funding
A treasury viewpoint on the funding optimization problem
South African corporates expect to sign CSAs
Power giant Eskom and South African Airways want to cut hedging costs
Cross-currency basis causes pricing headache for dealers in Japan
Yen and dollar funding discrepancies hit Nikkei options market
Nomura books ¥10 billion FVA loss
Japanese bank follows JP Morgan and Deutsche Bank by incorporating funding costs into derivatives valuation
JP Morgan takes $1.5 billion FVA loss
The US bank announces a one-off FVA primarily due to uncollateralised derivatives receivables
Risk management system of the year (vendor): Markit Group
Capital and funding efficiency is a new discipline for derivatives desks, and there is a shortage of comprehensive systems - so Lloyds Banking Group teamed up with Markit to build one
Cutting Edge introduction: another FVA?
Including funding costs and benefits in derivatives prices is a controversial topic, closely tied up with the credit and debit valuation adjustments of counterparty risk. But new research suggests that, even with no default risk, differences in the…
Op risk, FVA and OIS - Risk.net’s top stories of 2013
Operational risks, funding valuation adjustment and the money made by one dealer in the early days of OIS discounting – the top stories of the year on Risk.net
Cutting Edge introduction: fixing FVA
The funding valuation adjustment (FVA) is the biggest controversy of recent times in quantitative finance. Now the authors of the original FVA paper are back – and think there may be a solution. Laurie Carver introduces this month’s technical articles
Funding strategies, funding costs
Funding strategies, funding costs