Quantifi: Funding Valuation Adjustment (FVA), Part 2: The FVA Debate

Previously we introduced FVA - Funding Valuation Adjustment - and outlined different scenarios when it has to be calculated. We also demonstrated the role of wrong-way risk, including one arising from a correlation between the default risk of a bank and its counterparty. Here we describe the on-going industry debate on how to treat FVA – as a part of risk-neutral pricing or as an extra cost of a trade.

The cost of funding the hedge

To recap, the simplest and most common circumstance when

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact [email protected] or view our subscription options here: http://subscriptions.risk.net/subscribe

You are currently unable to copy this content. Please contact [email protected] to find out more.

To continue reading...

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

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here: