Download This PaperPricing of Derivatives Contracts under Collateral Agreements: Liquidity and Funding Value Adjustments
30 Pages Posted: 19 Dec 2011 Last revised: 13 Jun 2013
Date Written: March 20, 2013
Abstract
We analyse the pricing of derivatives under a CSA agreement, without considering netting, minimum transfer amounts and thresholds. We come up with a decomposition of the total contract's value in a risk-free component, a liquidity value adjustment and a funding value adjustment. Implications for the organization of a dealing room are also investigated.
Keywords: collateral, CSA, liquidity value adjustment, LVA, funding value adjustment, FVA, derivatives, swap, FRA
JEL Classification: G12, G13
Suggested Citation: Suggested Citation
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