WHAT IS THIS? The XVAs are a family of adjustments that can be made to the price of a derivatives trade, reflecting counterparty risk (CVA), own-default risk (DVA), funding (FVA), capital (KVA) and margin (MVA). Their theoretical roots and practical implementation are still debated, but pragmatism also matters: banks that ignore XVAs are at risk of mispricing a trade; banks that include them are at risk of never winning a trade.

##### CVA exposures to UK corporates jump ‘hundreds of millions’

Dash for credit protection triggered a doom loop in the CDSs of cross-currency swap counterparties

##### Data-driven wrong-way risk

A calculation method for regulatory CVA wrong-way risk based on credit and exposure is introduced

##### XVAs boost Helaba trading income but inflate hedging costs

Expense from non-trading hedges reaches highest since at least 2016

##### Is stochastic cross-currency basis a better way to model IM?

Using Monte Carlo model extension for forward IM calculation avoids excessive outputs for MVA

##### The contractual dividend bleed

Models for dividend protected options need to compensate for valuation mismatches

##### A new way to calculate conditional expectations

Gaussian distributions can sharpen one of the most commonly used tools in quant finance

##### CDS notionals made a comeback in 2021

A 5% rise to highest end-year figure since 2017 driven by swaps on junk debt

##### No soft landings in flight to safety from Russia

Impact of Ukraine invasion hit bank balance sheets hard; its effects look set to continue

##### Banks adopt Python for faster XVA data analysis and pricing

Some banks claim the coding language permits XVA pricing in milliseconds

##### JP Morgan takes $524m XVA loss on nickel, Russia trades Margin calls, markdowns and rising funding costs result in biggest XVA loss since early 2020 ##### Climate is changing for derivative valuation adjustments Banks back increased use of global warming criteria when calculating XVAs ##### Russian invasion stirs up ‘perfect storm’ for XVA desks Declining credit quality of Russian companies and spike in inflation threaten CVA and FVA double-whammy for banks ##### Podcast: UBS’s Gordon Lee on conditional expectations and XVAs Top quant explains why XVA desks need a neighbour and a reverend ##### XVA in Japan: the outlook for 2022 Hiroyuki Yoshizawa, executive director, pricing valuations and reference data at IHS Markit Group Japan explores why financial institutions that were early-accounting CVA adopters are now taking the next steps on their XVA journeys ##### Review of 2021: Default, revolt, reform Archegos, GameStop, the last days of Libor – markets just about coped in a bleak and disorderly year ##### XVAs and counterparty credit risk for energy markets: addressing the challenges and unravelling complexity In this webinar, a panel of quantitative researchers and risk practitioners from banks, energy firms and a software vendor discuss practical challenges in the modelling and risk management of XVAs and CCR in the energy markets, and how to overcome them. ##### Degree of influence 2021: XVA marks the spot Research into valuation adjustments is back on quants’ to-do list ##### Solving the data challenge: technical solutions for optimisation of risk management, capital and liquidity resources Since the financial crisis that began in 2007–08, regulatory pressure on requirements around capital adequacy, liquidity, funding, balance sheet size and leverage has become increasingly intense. As a consequence, financial institutions need to manage… ##### Nomura nets ¥3.8 billion from CVA and DVA gains Windfall offsets previous quarter’s loss more than three times over ##### Liquidity valuation adjustment costs JPM$235m

Tweak to derivatives book weighs on the bank’s fixed income revenues

##### After Archegos, a bigger role for XVA desks?

Credit Suisse has stalled on call to expand XVA remit; others think it would have helped, but disagree on how

##### Axes that matter: PCA with a difference

Differential PCA is introduced to reduce the dimensionality in derivative pricing problems

##### Derivatives pricing starts feeling the heat of climate change

Quants find physical and transition risks can lead to significant rise in CVA

##### How XVA quants learned to trust the machine

Initial scepticism about using neural networks for derivatives pricing is giving way to enthusiasm

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