FVA, Modelling and Netting Arbitrage - Introduction
16 Pages Posted: 9 Jan 2013 Last revised: 7 Jan 2016
Date Written: June 3, 2012
Abstract
After Lehman default and the Euro Crisis (crisis which started mid-2007), the industry started to consider the funding risk as a major risk. The practitioners began to charge for their funding cost. In this stressed context, the FVA has been the subject of intense debate, even its definition is not well established. In this article we follow the footsteps of Kamtchueng by establishing netting arbitrage in the FVA framework relative to our hedging strategy. It is the first time that the FVA is related to another funding spread.
Keywords: FVA, netting, arbitrage, funding valuation adjustment, funding cost
JEL Classification: C00, C15, C52, C63, G12, G13
Suggested Citation: Suggested Citation
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