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In the Balance

Christoph Burgard

Barclays Investment Bank

Mats Kjaer

Bloomberg L.P.

March 14, 2011

C. Burgard, M. Kjaer. In the balance, Risk, November, 72-75, 2011.

Funding costs and counterparty credit risk adjustments have become increasingly important contributions to the total value of derivatives positions. Based on a recently developed derivatives pricing framework that incorporates these two effects in a unified way, we discuss the relationship of the funding cost adjustment to the balance sheet. We also demonstrate two ways in which the funding cost adjustment can be eliminated, resulting in symmetric derivatives values.

Number of Pages in PDF File: 12

Keywords: Derivative funding cost adjustment, CVA, Central funding unit, Balance sheet management

JEL Classification: G13, G24, G32

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Date posted: March 19, 2011 ; Last revised: August 7, 2014

Suggested Citation

Burgard, Christoph and Kjaer, Mats, In the Balance (March 14, 2011). C. Burgard, M. Kjaer. In the balance, Risk, November, 72-75, 2011.. Available at SSRN: https://ssrn.com/abstract=1785262 or http://dx.doi.org/10.2139/ssrn.1785262

Contact Information

Christoph Burgard
Barclays Investment Bank ( email )
5 The North Colonnade
Canary Wharf
London, E14 4BB
United Kingdom
Mats Kjaer (Contact Author)
Bloomberg L.P. ( email )
39-45 Finsbury Square
City Gate House
London, EC2A 1PQ
United Kingdom
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