Pricing Swaps Including Funding Costs

Antonio Castagna

Iason Ltd.

July 28, 2011

In this paper we study how to include funding costs into the pricing of interest rate swaps and we show how they affect the value of the swap via a Funding Value Adjustment (FVA), in analogy with the Credit Value Adjustment (CVA) and the DVA. We consider the pricing of swap contracts with no collateral agreement or any other form of credit risk mitigations.

Number of Pages in PDF File: 19

Keywords: funding, liquidity, DVA, credit spread, funding value adjustment, FVA

JEL Classification: G13

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Date posted: July 31, 2011 ; Last revised: January 31, 2012

Suggested Citation

Castagna, Antonio, Pricing Swaps Including Funding Costs (July 28, 2011). Available at SSRN: http://ssrn.com/abstract=1898950 or http://dx.doi.org/10.2139/ssrn.1898950

Contact Information

Antonio Castagna (Contact Author)
Iason Ltd. ( email )
7th Floor, Hume House
Dublin, 4
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