Derivative Pricing For FVA, CVA and Capital: So-Called XVA Adjustments

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Derivative Pricing For FVA, CVA and Capital: So-Called XVA Adjustments

Since the onset of the financial crisis derivative pricing has undergone nothing short of a revolution. What was once simple is now extremely complex and banks need to adopt a whole range of new methodologies to remain competitive in the new environment. Effectively what we are talking about is a series of valuation adjustments that have come into place to reflect new or increased risks. Since it was included in the Basel regulation CVA – the inclusion of credit risk in valuation – has been an important topic for banks. As this grew more complex questions began to be asked about things like DVA. At the same time the Libor discounting rate that used to be used to discount derivatives was found wanting – banks have had to come to grips with OIS discounting methodologies that are sensitive to credit and liquidity risk. This then led to CSA discounting, which explicitly related the changing value of the underlying collateral to the value of the derivative. This takes us up to the current point in time, where the funding costs of the trade (including the collateral) must also be priced into the derivative trade – it connects the derivatives business to the funding and balance sheet questions faced by the bank. This is what is known as FVA and it is one of the hottest topics in finance right now.

Location:

Stockholm, Sweden

Country:

Sweden

Start Date:

Oct 20, 2014

End Date:

Oct 21, 2014

Organizer:

N/A

Sectors:

Business & Finance