Quantifi: Funding Valuation Adjustment (FVA), Part 3: JPMorgan and FVA; Next stop XVA

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In the previous two blogs we introduced FVA and described the ongoing industry debate on how to treat FVA, whether as a part of risk-neutral pricing or as an extra cost of a trade. Interest in this topic was recently renewed, particularly in light of the JPMorgan’s (JPM) Q4 2013 earnings report on January 14th 2014, which for the first time included FVA.

JPM, during the investor presentation, explained the adoption of FVA:

FVA, which represents a spread over LIBOR, has the effect of

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