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.
Mnuchin makes life harder for quants
Proposed CCAR changes make KVA calculations even more complex
Accelerated MVA in triCalculate
Sponsored feature: NEX TriOptima
Margin settlement risk and its effect on CVA
Sponsored feature: CompatibL
XVA reaches far and wide
Sponsored Q&A: CompatibL, Murex and Numerix
Buy side unimpressed with Mifid II cost transparency rules
Clients question value of receiving dealers’ swaps profit margin data
Banks split on Mifid II pre-trade compliance
Esma promises guidance, but some say ‘firm, executable’ quotes are impossible
A sound modelling and backtesting framework for forecasting initial margin requirements
Anfuso, Aziz, Loukopoulos and Giltinan propose a method to develop and backtest forecasting models for IM
European banks tire of CVA guessing game
Continued political wrangling over Europe’s CVA exemption increases uncertainty for dealers
TriOptima adds MVA calculations to XVA service
Three firms have signed up to use the tool, which calculates MVA across 100,000 scenarios
FVA: the story so far
How Risk.net has covered key developments in funding valuation adjustment
Japan CVA shift may break local banks’ swaps stranglehold
Introduction of pricing adjustment could see foreign banks compete for corporate business
Academics warn against overuse of machine learning
Lack of data makes AI technology unsuitable for risk management, say Cont and Rebonato
‘A choreographed ballet’: academics attack CVA
Derivatives add-on rubbished by Cont and Rebonato
Derivatives sales 2.0: banks explore big data
Pressured banks hope new tools and technical nous will give their sales teams an edge
Derivatives funding, netting and accounting
Christoph Burgard and Mats Kjaer expand their semi-replication framework to multiple counterparties
Three Japanese banks consider new CVA approach
Industry working group formed to discuss introducing accounting adjustment
Why XVAs need to be factored into options pricing
Ignoring valuation adjustments could be storing up problems for the future
Natural hedges: swapping the City for New Zealand
After a decade in forex sales, Tony Beard now advises a Maori tribe on hedging
XVA at the exercise boundary
Andrew Green and Chris Kenyon show how the decision to exercise an option is influenced by XVAs
ANZ's CVA loss flags challenge for regional banks
Many smaller dealers thought to be out of step with market practice and new capital rules
Banks and clients clash over novation MVA charges
Some banks swallowing new margin funding costs, others forcing clients to pay up
Isda touts CSA standardisation in margining countdown
But scale of challenge becomes clear in early tussles between dealers and clients
Degree of influence, 2016: capital matters
Capital, liquidity and XVAs are still the core of quantitative research in banking
Basel considered axing standardised approach to CVA calculation
Committee discussed axing standardised and basic approaches in recent months, sources say – but ruled out both