Dealers say they are losing derivatives business to competitors that are not charging enough for funding valuation adjustment (FVA) – the costs and benefits associated with uncollateralised or partly collateralised trades. Smaller banks are said to be the primary offenders.
FVA arises when a dealer has executed an uncollateralised trade with a client and hedged it under the terms of a two-way credit support annex (CSA), which requires both sides to post collateral. When the dealer is in-the-mone
The week on Risk.net, March 10-16 2018Receive this by email