Technical paper/Funding valuation adjustment (FVA)
Funding, wealth transfer and financial stability in the post-Libor era
Adjusting RFR with a funding premium may aid economic growth and stability
KVA as a transfer of wealth
A capital valuation adjustment designed to preserve a firm’s value to shareholders is introduced
Funding adjustments in equity linear products
How tax asymmetries and Tobin tax affect the pricing of total return swaps
In the balance redux
Mats Kjaer developes a dynamic balance-sheet pricing model for valuation adjustments
A model for the valuation of assets with liquidity risk
This paper describes a model for the valuation of assets on a bank balance sheet with liquidity risk. It applies the model to single cashflows, loans, bonds and derivatives. In addition, the calibration to London Interbank Offered Rate basis spreads is…
Derivatives funding, netting and accounting
Christoph Burgard and Mats Kjaer expand their semi-replication framework to multiple counterparties
XVA at the exercise boundary
Andrew Green and Chris Kenyon show how the decision to exercise an option is influenced by XVAs
Risk optimisation: the noise is the signal
Benedict Burnett, Simon O’Callaghan and Tom Hulme introduce a new method of optimising the accuracy and time taken to calculate risk for an XVA trading book. They show how to make a dynamic choice of the number of paths and time discretisation focusing…
A bond consistent derivative fair value
This paper presents a rigorously motivated pricing equation for derivatives.
Capital and funding
Quants propose KVA and FVA accounting framework based on Solvency II regulation
Liability-side pricing of swaps
Wujiang Lou presents a framework to compute recursive CVA and FVA via Monte Carlo simulation
From FVA to KVA: including cost of capital in derivatives pricing
Youssef Elouerkhaoui presents a general derivatives pricing framework including cost of capital
The funding invariance principle
Youssef Elouerkhaoui shows how the choice of discounting rate is irrelevant for pricing
FVA for general instruments
Alexander Antonov, Bianchetti and Mihai develop a universal and efficient approach to numerical FVA calculation
Cutting Edge introduction: Law-abiding FVA
HSBC quant develops an FVA model that preserves the law of one price
Efficient XVA management: pricing, hedging and allocation
Kenyon and Green show how certain technical elements simplify XVA management
CVA and FVA with liability-side pricing
Wujiang Lou calculates CVA and FVA abiding by the law of one price
Cutting edge introduction: Funding holes in Black-Scholes
HSBC quant builds funding costs and haircuts into Black-Scholes option pricing formula
Funding in option pricing: the Black-Scholes framework extended
Wujiang Lou shows the impact of funding costs on option valuation
FVA accounting, risk management and collateral trading
Albanese, Andersen and Iabichino present a method for accounting and risk managing FVAs
Backward induction for future values
A new framework for derivatives pricing with valuation adjustments