Valuation adjustments (XVA)
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.
MVA taking the long road to acceptance
Four years on, the adjustment is still not a standard part of non-cleared swap pricing
Smaller Japan banks set to adopt CVA accounting
IFRS convergence levels playing field as regional banks start to price in credit risk
Competitive differentiation – Reaping the benefits of XVA centralisation
A forum of industry leaders discusses the latest developments in XVA and the strategic, operational and technological challenges of derivatives valuation in today’s environment, including the key considerations for banks looking to move to a standardised…
The theoretical foundations of XVAs
Bloomberg analyses the theoretical basis of XVAs, focusing on the works and findings of its head of quantitative XVA analytics, Mats Kjaer, who emphasises the role of the capital valuation adjustment as a major driver of derivatives trading profitability…
StanChart’s CVA charge jumps 39% in Q3
CVA accounts for an ever-increasing portion of the bank’s total counterparty credit risk
FVA – Time to go asymmetric?
Despite being introduced over six years ago, there is still no market consensus on how to calculate funding valuation adjustments. One point of contention is whether to use the same funding curve for borrowing and lending (symmetric funding) or to use…
Best CVA practices in Japan
At a recent roundtable in Tokyo, banks and regulators discussed progress on credit valuation adjustment (CVA). While, in many respects, the work towards implementing best practices in the country is on track, challenges remain in resourcing and…
Podcast: Mats Kjaer on how trades affect the balance sheet
Bloomberg quant has developed a balance-sheet model for XVA pricing
In the balance redux
Mats Kjaer developes a dynamic balance-sheet pricing model for valuation adjustments
Gaming tests, loss provisions and synthetic Libor
The week on Risk.net, September 28–October 4, 2019
Basel III heralds wild CVA capital swings
Minimum required capital for CVA to climb 64% for large banks, but some banks will see falls of up to 67%
European FRTB proposals spark XVA overload fears
Banks warn of overly complex revaluation process and heightened risk of backtest fails
JP Morgan’s CVA charge jumps $249m in Q2
All US G-Sibs post higher CVA capital requirements for the quarter
Top UK banks cut CVA charges by 9% in Q2
Standard Chartered is only outlier among big five to see capital requirement rise
XVA solution of the year: Numerix
Asia Risk Technology Awards 2019
First-half trading revenues at US G-Sibs increase by a third year-on-year
Income from interest rate exposures more than tripled on H1 2018, while equity revenues increased 17%
Podcast: McClelland on why you need a good MVA model
Numerix quant presents a model aimed at showing the total cost of a trade
Singapore banks begin to phase in XVA
DBS, OCBC and UOB start using valuation adjustments, but face hedging hurdles for CVA
CVA, debt raising said to drive SoftBank CDS trading
Volumes rise as tech giant’s debt spree forces banks to hedge their counterparty exposure
Japan’s megabanks begin pricing in CVA
Local firms align with foreign dealers to include counterparty credit risk in corporate swap quotes