Valuation adjustments (XVAs)
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.
New research shows FVA is not part of P&L – Duffie
Pricing experts defend practices that resulted in huge FVA losses
KVA pushes accounting standards to the limit
Radical changes needed if banks are to account for cost of capital
Managing XVAs: from whack-a-mole to Mortal Kombat
Joined-up effort to tackle XVAs reflects growing impact of derivatives valuation adjustments
Banks launch drive to crush outsized XVAs
Novations and profit-sharing form part of push to trim derivatives valuation adjustments
EBA lacks mandate for new CVA push, critics claim
Move to hike counterparty risk capital has corporate treasurers ‘fuming’
Swap auction frictions prompt search for new tactics
Standards may be needed to preserve benefits of credit-auction approach to big swaps
Banks work together in effort to reduce XVA costs
Dealers offer rewards to clients and rivals for help in cutting valuation adjustments
How FVA saved the cross-currency swap
Funding benefits have slashed pricing for some uncollateralised trades
Dodgy discounts: DVA claims fly in cross-currency market
Derided pricing adjustment is being used to undercut competition, traders claim
Year of the XVAs: top technical papers and authors of 2015
Funding valuation adjustment under the microscope, along with other, newer XVAs
MVA will be a ‘game-changer’, say valuation experts
Leap in initial margin will cut CVA, FVA and KVA, but generate new funding effects
FVA for general instruments
Alexander Antonov, Bianchetti and Mihai develop a universal and efficient approach to numerical FVA calculation
Supervisors need to understand XVAs – OCC official
Benhart confirms OCC examiners are looking at valuation adjustments
Albanese: crushing capital costs
Having tackled FVA, Claudio Albanese is now focused on capital optimisation
Traders see DVA adjustment as 'accounting fudge'
Dealers at London event remain unconvinced by controversial funding adjustment
FVA – what's wrong, and how to fix it
Albanese and Andersen elaborate on controversial Risk article
Banks shun internal models in CVA impact study
Accounting exposures win out as banks seek to align capital with front-office practice
Veolia: taking XVAs by the horns
Veolia's Damien Vancraeyneste, on capping costs and challenging banks’ calculations
The rise of KVA: how 10 banks are pricing the capital crunch
Risk survey shows new add-on is gaining acceptance and could reshape the swaps business
Banks split on accounting for KVA – Risk survey
Accounting standard is coming, say some - others see no KVA requirement
KVA losses would outweigh FVA – Risk survey
Respondents reveal huge gulf in pricing for generic swap
Wrong-way risk done right
Jacky Lee and Luca Capriotti present an arbitrage-free valuation method for counterparty exposure of credit derivates portfolios.
‘Smart’ derivatives can cure XVA headaches
Cryptocurrency technology could revolutionise derivatives valuation and collateralisation, say Massimo Morini and Robert Sams
Corporates use XVA caps to limit unwind charges
Veolia caps CVA and FVA unwind costs in trades with 10 banks