Valuation adjustments (XVAs)
WHAT IS THIS? The XVAs are a family of adjustments that can be made to the price of a derivatives trade, reflecting counterparty risk (CVA), own-default risk (DVA), funding (FVA), capital (KVA) and margin (MVA). Their theoretical roots and practical implementation are still debated, but pragmatism also matters: banks that ignore XVAs are at risk of mispricing a trade; banks that include them are at risk of never winning a trade.
Japan CVA shift may break local banks’ swaps stranglehold
Introduction of pricing adjustment could see foreign banks compete for corporate business
Academics warn against overuse of machine learning
Lack of data makes AI technology unsuitable for risk management, say Cont and Rebonato
‘A choreographed ballet’: academics attack CVA
Derivatives add-on rubbished by Cont and Rebonato
Derivatives sales 2.0: banks explore big data
Pressured banks hope new tools and technical nous will give their sales teams an edge
Derivatives funding, netting and accounting
Christoph Burgard and Mats Kjaer expand their semi-replication framework to multiple counterparties
Three Japanese banks consider new CVA approach
Industry working group formed to discuss introducing accounting adjustment
Why XVAs need to be factored into options pricing
Ignoring valuation adjustments could be storing up problems for the future
Natural hedges: swapping the City for New Zealand
After a decade in forex sales, Tony Beard now advises a Maori tribe on hedging
XVA at the exercise boundary
Andrew Green and Chris Kenyon show how the decision to exercise an option is influenced by XVAs
ANZ's CVA loss flags challenge for regional banks
Many smaller dealers thought to be out of step with market practice and new capital rules
Banks and clients clash over novation MVA charges
Some banks swallowing new margin funding costs, others forcing clients to pay up
Isda touts CSA standardisation in margining countdown
But scale of challenge becomes clear in early tussles between dealers and clients
Degree of influence, 2016: capital matters
Capital, liquidity and XVAs are still the core of quantitative research in banking
Basel considered axing standardised approach to CVA calculation
Committee discussed axing standardised and basic approaches in recent months, sources say – but ruled out both
Clients should prepare to pay MVA costs, say dealers
Risk USA: Banks say new trades and novations create real funding costs
China rates swap prices diverge on spotty CVA practices
Most local banks not passing on capital charge to clients, say traders
People: Ramambason joins StanChart as head of XVA
Head of financial markets leaves StanChart; SocGen management shuffle; Lake leaves HSBC
StanChart hires Ramambason as head of XVA
Ramambason to lead newly created XVA desk
Traders blame bail-in for Deutsche CDS jump
Debt subordination behind spread widening from January; CVA desks may need to adjust hedge ratios
CME set to clear CMBX index swaps
Product to clear next year amid fears of falling liquidity from new non-cleared margin requirements
Banks warn prime brokerage clients of ‘material’ MVA costs
Some buy-siders reassessing relationships as a result
March margin deadline may force clients onto new CSAs
Dealers say they lack capacity to renegotiate thousands of existing collateral agreements
Managing the alphabet soup of XVAs
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Dealers grapple with netting valuation adjustments
Some banks are expressing netting uncertainty as a fair value adjustment to CVA