Should Derivatives Dealers Make A Funding Value Adjustment?

By: John Hull, Alan White

Many derivatives dealers believe that they should incorporate their funding costs into the determination of the fair value of derivatives. The resulting change in the value of the derivative is known as a funding value adjustment (FVA). In this chapter we shall present a sequence of arguments to show that a funding value adjustment should not be made. The value of a derivatives transaction, or portfolio of derivatives transactions, does depend on the credit risk of the two sides, but it should n

To continue reading...

You must be signed in to use this feature.

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 indvidual account here: