CVA and FVA with funding aware close outs
7 Pages Posted: 6 Oct 2012
Date Written: October 5, 2012
Abstract
The claim on a derivative contract upon default of one of the counterparties depends on the way the close-out amount is determined. Whether or not this close-out amount includes the cost of funding affects the CVA and FVA. We specify how to calculate CVA and FVA under different funding cost dependent close-out rules
Keywords: Counterparty risk, Closeout rules, CVA, FVA, Funding, PDE, Feynman-Kac theorem
JEL Classification: G13
Suggested Citation: Suggested Citation
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