Yes, FVA is a Cost for Derivatives Desks - A Note on 'Is FVA a Cost for Derivatives Desks?' by Prof. Hull and Prof. White

15 Pages Posted: 5 Sep 2012

Date Written: August 30, 2012

Abstract

A recent paper by Professors Hull and White argues that the Funding Value Adjustment is not a cost for the derivative desks. They suggest that the correct discounting rate is always the risk-free rate, thus excluding any possible accounting for the actual funding rate paid by the bank. Their main statements and an in depth analysis on each one are shown in what follows, reaching an opposite result.

Keywords: FVA, DVA, CVA, funding

JEL Classification: G12, G13

Suggested Citation

Castagna, Antonio, Yes, FVA is a Cost for Derivatives Desks - A Note on 'Is FVA a Cost for Derivatives Desks?' by Prof. Hull and Prof. White (August 30, 2012). Available at SSRN: https://ssrn.com/abstract=2141663 or http://dx.doi.org/10.2139/ssrn.2141663

Antonio Castagna (Contact Author)

Iason Ltd. ( email )

7th Floor, Hume House
Dublin, 4
Ireland

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